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CA Intermediate · Advanced Accounting · AS 15 Employee Benefits

Meghna Pharma Ltd. has a defined benefit gratuity plan. Present value of defined benefit obligation at year end is Rs 48,00,000. Fair value of plan assets at year end is Rs 41,50,000. Unrecognised past service cost relating to non-vested benefits is not applicable. Under AS 15, what is the amount to be shown in the balance sheet?

A net liability of Rs 6,50,000 is shown. Under AS 15 the balance sheet amount for a defined benefit plan is the present value of the obligation less the fair value of plan assets, here Rs 48,00,000 minus Rs 41,50,000, and since obligation exceeds assets it is a liability.

  1. ALiability of Rs 6,50,000Correct
  2. BAsset of Rs 6,50,000
  3. CLiability of Rs 48,00,000
  4. DLiability of Rs 89,50,000

Explanation

The net amount recognised is present value of obligation minus fair value of plan assets = 48,00,000 - 41,50,000 = Rs 6,50,000, a net liability since obligation exceeds assets. Showing the gross obligation ignores plan assets; adding them is a sign error.

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