IAS 19 Disclosures Example: Reconciliation to Assets and Liabilities recognized on the balance sheet

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In the previous post we looked at IAS 19 Disclosures related to the reconciliation in the present value of defined benefit obligation and fair value of assets during the year. In this post we look at the disclosure showing the reconciliation of the actuarial liability and fair value of assets to the assets and liabilities that are recognized in the balance sheet.

a)      A reconciliation of the present value of the defined benefit obligation and the fair value of the plan assets to the assets and liabilities recognized in the balance sheet. In order to prepare this reconciliation we first need to consider the movement in unrecognized actuarial gains and loss during 2010. For our example this is determined as follows:

  Movement in Unrecognized Actuarial Gain (Loss) During the year ended 12/31/2010
1 Unrecognized Actuarial Gain (Loss) as at 31/12/2009         500.00
2 Actuarial Gain (Loss) on Obligation         674.96
3 Actuarial Gain (Loss) on Assets

-40.00

4 Net Gain (Loss) as at 31/12/2010; (2)+(3)         634.96
5 Actuarial Gain (Loss) to be recognized for the year ended 31/12/2010     0.00  
6 Unrecognized Actuarial Gain (Loss) as at 31/12/2010; (1)+(4)-(5)

-1,134.96

Where Item 5 was calculated in last year’s valuation (2009) as follows using the corridor limit approach:

1 Present value of Funded Gratuity Obligation- Actuarial Liability as at 31-12-2009      8,867.77
2 Fair Value of Plan Assets as at 31-12-2009      8,000.00
3 Greater of (1) and (2)      8,867.77
4 10% Corridor         886.78
5 Net cumulative unrecognized actuarial gain         500.00
6 Excess of (5) over (4)                –  
7 Average expected remaining working lives (years)           30
8 Amortization of Gain (Loss) to be recognized in the following year beginning 1st January 2010; (6)/(7)                0.00  

The reconciliation of the present value of defined benefit obligation and fair value of assets to the assets and liabilities to be recognized in the balance sheet is as follows:

  Asset (Liability) to be recognized in the Balance Sheet as at

12/31/2010

1 Present value of Funded Gratuity Obligation- Actuarial Liability as at 31-12-2010

   10,454.09

2 Fair Value of Plan Assets

   10,000.00

3 Funded Status [(Deficit)/ Surplus]; (2)-(1)

-454.09

4 Unrecognized Actuarial (gain) loss

-1,134.96

5 Asset (Liability) to be recognized as at 31/12/2010; (3)+(4)

-1,589.05

 In this post we reviewed the IAS 19 disclosure with shows how to determine the assets (liabilities) to be recognized in the balance sheet. In the following post we see the disclosure pertaining to the gratuity expense that has to be recognized in the profit and loss statement.