Reference no: EM133079697
The Case of Carrington Ltd
Carrington Ltd is a construction company that operates in the Turks and Caicos Islands. As a public limited entity, it prepares it financial statements in accordance with IFRS. Read the scenarios below and advise how each must be treated according to IAS 19 - Employee Benefits.
Scenario 1
Carrington Ltd has a profit sharing plan that requires the entity to pay a specified proportion of its profit for the year to employees who serve throughout the year. If no employees leave during the year, the total profit sharing payments for the year will be 3% of profit. The entity estimates that staff turnover will reduce the payments to 2.5% of profit.
Scenario 2
Carrington Ltd participates in a multi-employer defined benefit plan that does not prepare plan valuations on an IAS 19 basis. It therefore accounts for the plan as if it were a defined contribution plan. A non-IAS 19 funding valuation shows a deficit of 100 million in the plan. The plan has agreed under contract a schedule of contributions with the participating employers in the plan that will eliminate the deficit over the next five years. Carrington's total contributions under the contract are 8 million.
Scenario 3
Carrington Ltd has 100 employees, who are each entitled to five working days of paid sick leave for each year. Unused sick leave may be carried forward for one calendar year. Sick leave is taken first out of the current year's entitlement and then out of any balance brought forward from the previous year. At 30 December 2019, the average unused entitlement is two days per employee. Carrington Ltd expects, based on past experience, which is expected to continue, that 92 employees will take no more than five days of paid sick leave in 2020 and that the remaining eight employees will take an average of six and a half days each.
Scenario 4
Carrington's post employment medical plan reimburses 40% of its employee's post employment medical costs if the employee leaves after more than ten and less than twenty years of service and 50% of those costs if the employee leaves after twenty or more years of service.
Scenario 5
Carrington has a post employment medical plan that reimburses 10% of an employee's post employment medical costs if the employee leaves after more than ten and less than twenty years of service and 50% of those costs if the employee leaves after twenty or more years of service.