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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Meru Engineering Ltd has a long-service benefit plan, which is an other long-term employee benefit. Opening net liability was Rs 50 lakh and the discount rate is 8%. Current service cost for the year is Rs 12 lakh, benefits paid from the plan are Rs 6 lakh, contributions to the plan are Rs 6 lakh, and actuarial losses are Rs 3 lakh. Assume no interest effect on payments and contributions made at year end. What total amount is charged to profit or loss for the year?

Rs 19 lakh is charged to profit or loss. This is service cost of Rs 12 lakh plus net interest of Rs 4 lakh (8% of Rs 50 lakh) plus actuarial loss of Rs 3 lakh, because other long-term benefit remeasurements are not taken to other comprehensive income.

  1. ARs 16 lakh
  2. BRs 19 lakhCorrect
  3. CRs 22 lakh
  4. DRs 12 lakh

Explanation

For other long-term benefits, the simplified method puts service cost, net interest and remeasurements all in profit or loss (para 154 says remeasurements are not in OCI). Net interest = 8% x 50 = Rs 4 lakh. Total = 12 + 4 + 3 = Rs 19 lakh. Rs 16 lakh omits the actuarial loss, and it is the key distractor.

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