Page 233 - Group Insurance and Retirement Benefit IC 83 E- Book

182 AS 15

approximation of the detailed computations.

Accounting for the Obligation under a Defined Benefit Plan

53. An enterprise should account not only for its legal obligation under
the formal terms of a defined benefit plan, but also for any other obligation
that arises from the enterprise’s informal practices. Informal practices
give rise to an obligation where the enterprise has no realistic alternative
but to pay employee benefits. An example of such an obligation is where a
change in the enterprise’s informal practices would cause unacceptable
damage to its relationship with employees.

54. The formal terms of a defined benefit plan may permit an enterprise
to terminate its obligation under the plan. Nevertheless, it is usually
difficult for an enterprise to cancel a plan if employees are to be retained.
Therefore, in the absence of evidence to the contrary, accounting for post-
employment benefits assumes that an enterprise which is currently
promising such benefits will continue to do so over the remaining working
lives of employees.

Balance Sheet

55. The amount recognised as a defined benefit liability should be the
net total of the following amounts:

(a) the present value of the defined benefit obligation at the balance
sheet date (see paragraph 65);

(b) minus any past service cost not yet recognised (see paragraph
94);

(c) minus the fair value at the balance sheet date of plan assets (if
any) out of which the obligations are to be settled directly (see
paragraphs 100-102).
56. The present value of the defined benefit obligation is the gross
obligation, before deducting the fair value of any plan assets.

57. An enterprise should determine the present value of defined benefit
obligations and the fair value of any plan assets with sufficient regularity
that the amounts recognised in the financial statements do not differ