Cima F1

Front 1

What are the four categories of employee benefits covered by IAS 19?

Back 1

- Short term

- Post-employment

- Other long term

- Termination

(Chapter 12)

Front 2

What is the difference between defined contribution and defined benefit plans?

Back 2

Defined contribution plan - employer engages to pay an agreed amount of contributions and undertakes no further liability.

Defined benefit plan - employer engages to pay and agreed level of benefits. If the plan assets are insufficient to meet the plan liabilities, the employer will have to make up the deficit.

(Chapter 12)

Front 3

What is a constructive obligation (compared to a legal obligation)?

Back 3

A constructive obligation arises from the entity's informal practices and exists when the entity has no realistic alternative but to pay employee benefits (e.g. if a change in informal practices would cause damage to employee relationships).

IAS 19 states that an entity must account for both its legal obligations (under formal terms of a defined benefit plan) and its constructive obligations.

Front 4

How should a defined benefit expense be recognised in the SPLOCI?

Back 4

SPL expense = current service cost + net interest on net defined liability + past service cost + cost of curtailment/settlement

OCI expense = remeasurement losses/(gains) on plan assets & obligations

Front 5

What causes remeasurement gains/losses?

Back 5

Arise as a result of actuarial assumptions about benefit payment options, salary and employee turnover estimates, and discount rates.

Front 6

What are the ten steps to accounting for defined benefit schemes?

Back 6

1. Record opening figures for assets/obligations

2. Interest cost on plan liabilities (based on discount rate)

3. Interest on plan assets (based on discount rate)

4. Current service cost

5. Contributions by employer

6. Benefits paid out

7. Past service cost

8. Gains/losses on settlement

9. Remeasurements: actuarial gains/losses

10. Remeasurements: return on assets - interest income

Front 7

Definition of cash?

(Per IAS 7 - Statement of Cash Flows)

Back 7

Cash comprises cash on hand and demand deposits.

(Chapter 13)

Front 8

Definition of Cash Equivalents?

(Per IAS 7 - Statement of Cash Flows)

Back 8

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(Chapter 13)

Front 9

Definition of Cash Flows?

(Per IAS 7 - Statement of Cash Flows)

Back 9

Inflows and outflows of cash and cash equivalents.

(Chapter 13)

Front 10

Definition of Operating Activities?

(Per IAS 7 - Statement of Cash Flows)

Back 10

Principle revenue-producing activities of the entity and other activities that are not investing or financing activities.

(Chapter 13)

Front 11

Definition of Investing Activities?

(Per IAS 7 - Statement of Cash Flows)

Back 11

The acquisition/disposal of non-current assets and other investments not included in cash equivalents.

(Chapter 13)

Front 12

Definition of Financing Activities?

(Per IAS 7 - Statement of Cash Flows)

Back 12

Activities that result in changes in the size and composition of the contributed equity capital and borrowings of the entity.

(Chapter 13)