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ACCA Strategic Professional · Strategic Business Reporting (International) · Employee benefits

Brook Co amends its defined benefit plan on 1 July 20X5, granting enhanced benefits for past service. The present value of the additional obligation is $1,200,000 and the benefits are not conditional on further service. How should Brook account for this?

Brook must recognise the full $1,200,000 as past service cost in profit or loss immediately at the plan amendment date. IAS 19 does not allow spreading over a vesting period, and past service cost is not an OCI remeasurement.

  1. ARecognise $1,200,000 in other comprehensive income immediately
  2. BRecognise $1,200,000 as past service cost in profit or loss immediatelyCorrect
  3. CSpread the cost over the average remaining vesting period
  4. DRecognise it in profit or loss only to the extent that benefits vest, deferring the remainder

Explanation

IAS 19 requires past service cost to be recognised in profit or loss at the earlier of when the amendment occurs and when related restructuring costs or termination benefits are recognised. Deferral over a vesting period was removed. OCI is for remeasurements only.

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