问题来源:
6. March 2020 Q4
(b)问主要考核的准则如下:
IAS19
IAS 37
Background
The directors of Ecoma Co consider environmental, social and governance issues to be extremely important in a wide range of areas, including new product development, reputation building and overall corporate strategy. The company is taking a proactive approach to managing sustainability and is actively seeking opportunities to invest in sustainable projects and embed them in their business practices. The company’s financial year end is 30 September 20X5.
Head office
Ecoma Co is committed to a plan to move its head office to a building which has an energy efficient green roof that acts as a natural temperature controller. The move from the current head office, which is leased, will take place at the company’s year end of 30 September 20X5. The new green roof building requires less maintenance than a conventional building and produces oxygen which offsets Ecoma Co’s CO2 emissions.
The directors of Ecoma Co believe that the green roof building will save the company $2 million per annum over the useful life of the building. However, over the next two years, it anticipates that the disruption of the move will cause the company to make a loss of $10 million per annum. The company wishes to make a provision of $16 million which comprises the loss to be incurred over the next two years net of the saving created by the green roof.
Meanwhile, the company will have to vacate its currently leased head office building. At 30 September 20X5, the lease has two years to run at a rental of $600,000 per annum payable in advance on 1 October each year. If the lease is cancelled, the full rental is payable on cancellation. The head-lease permits sub-letting and Ecoma Co has sub-let the building for one year from 1 October 20X5 at a rental of $400,000 per annum payable in advance. Ecoma Co estimates that there is a 40% probability that it will be able to extend the sub-lease at the same rental for a second year.
The costs of moving to the green building are estimated at $1 million and the costs of terminating the lease in two years’ time are negligible. The pre-tax discount rate is 5%.
Defined benefit pension scheme
Ecoma Co is worried that the poor remuneration package offered to employees is putting the company at risk of reputational damage. Consequently, Ecoma Co changed its pension scheme on 30 September 20X5 to include all of its staff.
The benefits accrue from the date of their employment but only vest after two years additional service from 30 September 20X5. The net pension obligation at 30 September 20X5 of $78 million has been updated to include this change. During the year, benefits of $6 million were paid under the scheme and Ecoma Co contributed $10 million to the scheme. These payments had been recorded in the financial statements. The following information relates to the pension scheme:
$m |
|
Net pension obligation at 30 September 20X5 |
78 |
Net pension obligation at 30 September 20X4 |
59 |
Service cost for year |
18 |
Past service cost (scheme amendment) |
9 |
Discount rate at 30 September 20X4 |
5.5% |
Discount rate at 30 September 20X5 |
5.9% |
Required:
(i) Discuss how the $16 million provision associated with Ecoma Co’s move to a new head office and the sub-let of its old head office should be accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. (6 marks)
(ii) Advise Ecoma Co on the principles of accounting for the pension scheme, including calculations, for the year to 30 September 20X5. (7 marks)
(iii) Calculate the impact which the above adjustments in (b)(i) and (ii) will have on profit before tax of $25 million for the year ended 30 September 20X5. Ignore any potential tax implications. (2 marks)
Answer for (b) (i)
Ecoma Co cannot make a provision of $16 million for the future operating losses of $20 million (these are specifically not allowed by IAS 37 Provisions, Contingent Liabilities and Contingent Assets), and the saving of $2 million per annum as no obligation exists. However, the lease represents an onerous contract and an appropriate provision should be made. IAS 37 defines an onerous contract as ‘a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.’
The onerous contract should be measured by determining the present value of the unavoidable costs, net of the expected benefits under the contract. The discount rate should be a pre-tax rate which reflects current market assessments of the time value of money and the risks specific to the liability.
In this case, the requirements of the onerous contract must be considered along with the prohibition in IAS 37 of providing for future operating losses. It is important to distinguish between unavoidable costs under an onerous contract, and future operating losses. Future operating losses are not independent of the entity’s future actions and do not normally stem from an obligation arising from a past event.
Therefore, the unavoidable cost of the onerous contract should be discounted to 30 September 20X5 is ( $600,000 + $600,000 / 1.05), i.e. $1,171,429.
The expected benefit of sub-letting the building arising at 30 September 20X5 will be ($400,000 + (40% × 400,000) / 1.05), i.e. $552,381.
A provision of $(1,171,429 – 552,381) $619,048 can therefore be made. In addition, a provision of $1 million can be made for the costs of moving to the new head office if it is felt that the cost is unavoidable. This gives a total provision of $1,619,048.
Answer for (b) (ii)
At each financial year end, the plan assets and the defined benefit obligation are remeasured. Remeasurement gains and losses are recognised in other comprehensive income.
The statement of profit or loss records the change in the surplus or deficit except for contributions to the plan and benefits paid by the plan and remeasurement gains and losses.
The amount of pension expense to be recognised in profit or loss is comprised of service costs and net interest costs. Service costs are the current service costs, which is the increase in the present value of the defined benefit obligation resulting from employee services in the current period, and ‘past-service costs’. Ecoma Co’s past-service costs are the changes in the present value of the defined benefit obligation for employee services in prior periods which have resulted from the plan amendment and should be recognised as an expense. IAS 19 Employee Benefits requires all past service costs to be recognised as an expense at the earlier of the following dates:
(a) when the plan amendment or curtailment occurs, and
(b) when the entity recognises related restructuring costs or termination benefits.
These costs should be recognised regardless of vesting requirements. Thus, the past service cost of $9 million will be recognised at 30 September 20X5.
Net interest on the net defined benefit liability is calculated by multiplying the opening net defined benefit liability by the discount rate at the start of the annual reporting period. Net interest on the net defined benefit liability can be viewed as effectively including theoretical interest income on plan assets.
The table below reflects the change in the net pension obligation for the period. The profit or loss will be charged with the net interest component of $3.2 million and the service cost of $27 million ($18 million + $9 million). OCI will be credited with $1.2 million and this gain cannot be reclassified to profit or loss. Benefits paid have no effect on the net obligation as both plan assets and obligations are reduced by $6 million.
$m |
Charge to |
|
Net pension obligation at 30 Sept. 20X4 |
59 |
|
Net interest (5.5% * 59m) |
3.2 |
Profit or loss |
Service cost for year |
18 |
Profit or loss |
Past service cost |
9 |
Profit or loss |
Contributions |
(10) |
Credited to cash |
Remeasurement |
(1.2) |
To OCI |
Net pension obligation at 30 Sep. 20X5 |
78 |
【手写板】
Opening bal. |
59 |
Current service |
18 |
Past service |
9 |
Net int. cost (59×5.5%) |
3.2 |
Benefits paid |
(-) |
Contribution paid |
(10) |
Remeasurement |
(1.2) |
Ending bal. |
78 |
Answer for (b) (iii)
Thus profit before tax of $25 million will suffer as the profit available to the ordinary shareholders will be reduced by:
$m |
|
Onerous contract provision (part (i)) |
1.6 |
Net interest component |
3.2 |
Past and current service cost |
27 |
31.8 |
Thus a loss of $6.8m ($25m – $31.8m) will now be reported.
王老师
2021-05-22 18:19:29 1039人浏览
哈喽!努力学习的小天使:
这笔分录不是在Ecoma Co 的公司做,是在另一个独立的养老金运作公司进行账务处理,在发放养老金时
借:应付款类相关负债科目
贷:银行存款
这个内容已经超出了ACCA sbr的考纲,考试只针对Ecoma Co的账务处理进行考核。
每个努力学习的小天使都会有收获的,加油!
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