Employee Benefit Obligations
The amounts (in Rs.) recognised in the balance sheet are as follows:
Defined benefit
pension plans |
Post-employment
medical benefits |
|||
20X5-X6 | 20X4-X5 | 20X5-X6 | 20X4-X5 | |
Present value of funded obligations | 20,300
_18,420_
1,880 |
17,400
_17,280_
120 |
–
-______
_ |
–
__-__
_ |
Fair value of plan assets |
||||
Present value of unfunded obligations |
2000
_(450)_
_3,430 |
1000
_(650)_
_ _470 |
7,337
__-____
_7,337 |
6,405
___-___
6,405_ |
Unrecognised past service cost Net liability |
||||
Amounts in the balance sheet: | ||||
Liabilities
Assets Net liability |
3,430
____-__ 3,430 |
560
___(90)_ __470 |
7,337
____-_ 7,337 |
6,405
_____-_ 6,405 |
The pension plan assets include equity shares issued by [name of reporting enterprise] with a fair value of Rs. 317 (20X4-X5: Rs. 281). Plan assets also include property occupied by [name of reporting enterprise] with a fair value of Rs. 200 (20X4-X5: Rs. 185).
The amounts (in Rs.) recognised in the statement of profit and loss are as follows:
The amounts (in Rs.) recognised in the statement of profit and loss are as follows:
Defined benefit Post-employment pension plans medical benefits 20X5-X6 20X4-X5 20X5-X6 20X4-X5 |
||||
Current service cost | 850 | 750 | 479 | 411 |
Interest on obligation | 950 | 1,000 | 803 | 705 |
Expected return on plan assets | (900) | (650) | ||
Net actuarial losses (gains) recognised in year | 2,650 | (650) | 250 | 400 |
Past service cost | 200 | 200 | ||
Losses (gains) on curtailments and settlements | 175 | (390) | ||
Total, included in ’employee benefit expense’ | 3,925 | 260 | 1,532 | 1,516 |
Actual return on plan assets |
600 |
2,250 |
__-____ |
__-____ |
Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows:
Defined benefit Post-employment
pension plans medical benefits 20X5-X6 20X4-X5 20X5-X6 20X4-X5 |
||||
Opening defined benefit | ||||
obligation | 18,400 | 11,600 | 6,405 | 5,439 |
Service cost | 850 | 750 | 479 | 411 |
Interest cost | 950 | 1,000 | 803 | 705 |
Actuarial losses (gains) | 2,350 | 950 | 250 | 400 |
Losses (gains) on curtailments | (500) | – | ||
Liabilities extinguished on settlements | – | (350) | ||
Liabilities assumed in an amalgamation in the nature of purchase | – | 5,000 | ||
Exchange differences on foreign plans | 900 | (150) | ||
Benefits paid | (650) | (400) | (600) | (550) |
Closing defined benefit obligation | 22,300 | 18,400 | 7,337 | 6,405 |
Changes in the fair value of plan assets representing reconciliation of the opening and closing balances thereof are as follows:
Defined benefit Post-employment
pension plans medical benefits 20X5-X6 20X4-X5 20X5-X6 20X4-X5 |
||||
Opening defined benefit | ||||
obligation | 18,400 | 11,600 | 6,405 | 5,439 |
Service cost | 850 | 750 | 479 | 411 |
Interest cost | 950 | 1,000 | 803 | 705 |
Actuarial losses (gains) | 2,350 | 950 | 250 | 400 |
Losses (gains) on curtailments | (500) | – | ||
Liabilities extinguished on settlements | – | (350) | ||
Liabilities assumed in an amalgamation in the nature of purchase | – | 5,000 | ||
Exchange differences on foreign plans | 900 | (150) | ||
Benefits paid | (650) | (400) | (600) | (550) |
Closing defined benefit obligation | 22,300 | 18,400 | 7,337 | 6,405 |
Changes in the fair value of plan assets representing reconciliation of the opening and closing balances thereof are as follows:
Defined benefit pension plans 20X5-X6 20X4-X5 |
||
Opening fair value of plan assets |
17,280 |
9,200 |
Expected return |
900 |
650 |
Actuarial gains and (losses) |
(300) |
1,600 |
Assets distributed on settlements |
(400) |
– |
Contributions by employer |
700 |
350 |
Assets acquired in an amalgamation in the nature of purchase |
– |
6,000 |
Exchange differences on foreign plans |
890 |
(120) |
Benefits paid |
(650) |
(400) |
18,420 |
17,280 |
The Group expects to contribute Rs. 900 to its defined benefit pension plans in 20X6-X7.
The major categories of plan assets as a percentage of total plan assets are as follows:
Defined benefit pension plans | Post-employment medical benefits | |||
20X5-X6 | 20X5-X5 | 20X5-X6 | 20X5-X5 | |
Government of India Securities | 80% | 82% | 78% | 81% |
High quality corporate bonds | 11% | 10% | 12% | 12% |
Equity shares of listed companies | 4% | 3% | 10% | 7% |
Property | 5% | 5% | – | – |
Principal actuarial assumptions at the balance sheet date (expressed as weighted averages):
20X5-X6 | 20X4-X5 | |
Discount rate at 31 March | 5.0% | 6.5% |
Expected return on plan assets at 31 March | 5.4% | 7.0% |
Proportion of employees opting for early retirement | 30% | 30% |
Annual increase in healthcare costs | 8% | 8% |
Future changes in maximum state health care benefits | 3% | 2% |
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
Assumed healthcare cost trend rates have a significant effect on the amounts recognised in the statement of profit and loss. At present, healthcare costs, as indicated in the principal actuarial assumption given above, are expected to increase at 8% p.a. A one percentage point change in assumed healthcare cost trend rates would have the following effects on the aggregate of the service cost and interest cost and defined benefit obligation:
One percentage point increase |
One percentage
point decrease |
|
Effect on the aggregate of the service cost and interest cost | 190 | (150) |
Effect on defined benefit obligation | 1,000 |
(900) |
Amounts for the current and previous four periods are as follows:
Defined benefit pension plans
20X5-X6 | 20X4-X5 | 20X3-X4 | 20X2-X3 | 20X1-X2 | |
Defined benefit obligation | (22,300) | (18,400) | (11,600) | (10,582) | (9,144) |
Plan assets | 18,420 | 17,280 | 9,200 | 8,502 | 10,000 |
Surplus/(deficit) Experience adjustments | (3,880) | (1,120) | (2,400) | (2,080) | 856
|
Experience adjustments on plan liabilities | (1,111) | (768) | (69) | 543 | (642) |
Experience adjustments on plan assets | (300) | 1,600 | (1,078) | (2,890) | 2,777 |
Post-employment medical benefits | ______ |
20X5-X6 | 20X4-X5 | 20X3-X4 | 20X2-X3 | 20X1-X2 | |
Defined benefit obligation | 7,337 | 6,405 | 5,439 | 4,923 | 4,221
|
Experience adjustments on plan liabilities | (232) | 829 | 490 | (174) | (103) |
The group also participates in an industry-wide defined benefit plan which provides pensions linked to final salaries and is funded in a manner such that contributions are set at a level that is expected to be sufficient to pay the benefits falling due in the same period. It is not practicable to determine the present value of the group’s obligation or the related current service cost as the plan computes its obligations on a basis that differs materially from the basis used in [name of reporting enterprise]’s financial statements. [describe basis] On that basis, the plan’s financial statements to 30 September 20X3 show an unfunded liability of Rs. 27,525. The unfunded liability will result in future payments by participating employers. The plan has approximately 75,000 members, of whom approximately 5,000 are current or former employees of [name of reporting enterprise] or their dependants. The expense recognised in the statement of profit and loss, which is equal to contributions due for the year, and is not included in the above amounts, was Rs. 230 (20X4-X5: Rs. 215). The group’s future contributions may be increased substantially if other enterprises withdraw from the plan.