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CMA Intermediate · Corporate Accounting and Auditing · Employee Benefits (Ind AS 19)

Sundaram Textiles Ltd has a defined benefit plan. At the start of the year the present value of the obligation was ₹500 lakh and the fair value of plan assets was ₹400 lakh. The discount rate is 10%. Current service cost is ₹60 lakh. At year end the company contributed ₹50 lakh and the plan paid benefits of ₹40 lakh. At year end the actuarial valuation of the obligation is ₹590 lakh and the fair value of plan assets is ₹460 lakh. What is the net remeasurement to be recognised in OCI?

The net remeasurement is a loss of ₹10 lakh in OCI. The obligation shows an actuarial loss of ₹20 lakh (590 against expected 570), partly offset by a ₹10 lakh gain on plan assets above interest income (460 against expected 450).

  1. ALoss of ₹10 lakhCorrect
  2. BLoss of ₹20 lakh
  3. CLoss of ₹30 lakh
  4. DGain of ₹10 lakh

Explanation

Expected obligation = 500 + 60 + 50 (interest) - 40 = 570, so the actuarial loss is 590 - 570 = 20. Expected assets = 400 + 40 (interest) + 50 - 40 = 450, so the return above interest is 460 - 450 = 10 gain. Net remeasurement is a loss of 20 - 10 = 10. Check: closing liability 130 = 100 + 60 + 10 + 10 - 50. Loss of 30 wrongly adds the asset gain to the loss.

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