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

Why does Ind AS 19 regard accounting for defined benefit plans as complex?

Defined benefit accounting is complex because measuring the obligation and expense needs actuarial assumptions, actuarial gains and losses may arise, and the obligation is discounted since settlement may occur many years after the service is rendered.

  1. AThe entity's obligation is limited to the contribution it agrees to pay
  2. BActuarial assumptions are needed to measure the obligation and expense, actuarial gains and losses may arise, and obligations are measured on a discounted basisCorrect
  3. CEmployees bear the investment risk of the plan assets
  4. DThe obligation is always settled in the year in which service is rendered

Explanation

Paragraph 55 says accounting is complex because actuarial assumptions are required, actuarial gains and losses are possible, and obligations are discounted as they may be settled many years after service. The other options describe defined contribution features or are incorrect.

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