Calculation of the actuarial gain/losses in year to 31 December 2010
|
FV of plan assets
|
PV of plan liabilities
|
|
$000
|
$000
|
|
Opening balance
|
2,600
|
2,900
|
|
Service cost
|
450
|
|
Interest cost (8% x $2,900,000)
|
232
|
|
Expected return (5% x $2,600,000)
|
130
|
|
Past service cost
|
90
|
|
Benefits paid
|
(240)
|
(240)
|
|
Contributions
|
730
|
|
3,220
|
3,432
|
|
Actuarial gain on assets
|
180
|
|
Actuarial loss on liabilities
|
68
|
|
Closing balance
|
3,400
|
3,500
|
|
|
|
|
(b) SARs are an example of a cash-settled share-based transaction and, in accordance with IFRS 2 Share-based payments, are primarily measured at fair worth at the grant date and consequently premeasured to fair value at each year-end. The liability is premeasured and any difference is charged to the income statement as an expense. (This description is not a required part of the answer but is included to aid understanding.)
2009
Eligible employees (300-32-35) = 233
Equivalent cost of SARs = 233 employees x 1,000 rights x FV$8 = $1,864,000
Allocate over 3 year vesting period $1,864,000/3 = $621,333 equivalent charge to the income statement in the first year.
2010
Eligible employees (300-32-28-10) = 230
Equivalent cost of SARs = 230 employees x 1,000 rights x FV$12 = $2,760,000
Cumulative amount to be recognised as a liability = $2,760,000 x 2/3 years = $1,840,000
Less amount previously recognised = $1,840,000-621,333 = $1,218,667
The expense will be recorded as:
Dr staff costs $1,218,667
Cr liability $1,218,667