Page 249 - Group Insurance and Retirement Benefit IC 83 E- Book

198 AS 15

96. Past service cost excludes:

(a) the effect of differences between actual and previously assumed
salary increases on the obligation to pay benefits for service in
prior years (there is no past service cost because actuarial
assumptions allow for projected salaries);

(b) under and over estimates of discretionary pension increases where
an enterprise has an obligation to grant such increases (there is no
past service cost because actuarial assumptions allow for such
increases);

(c) estimates of benefit improvements that result from actuarial gains
that have already been recognised in the financial statements if
the enterprise is obliged, by either the formal terms of a plan (or
an obligation that goes beyond those terms) or legislation, to use
any surplus in the plan for the benefit of plan participants, even if
the benefit increase has not yet been formally awarded (the
resulting increase in the obligation is an actuarial loss and not
past service cost, see paragraph 85(b));

(d) the increase in vested benefits (not on account of new or improved
benefits) when employees complete vesting requirements (there
is no past service cost because the estimated cost of benefits was
recognised as current service cost as the service was rendered);
and

(e) the effect of plan amendments that reduce benefits for future
service (a curtailment).

97. An enterprise establishes the amortisation schedule for past service
cost when the benefits are introduced or changed. It would be
impracticable to maintain the detailed records needed to identify and
implement subsequent changes in that amortisation schedule. Moreover,
the effect is likely to be material only where there is a curtailment or
settlement. Therefore, an enterprise amends the amortisation schedule for
past service cost only if there is a curtailment or settlement.

98. Where an enterprise reduces benefits payable under an existing
defined benefit plan, the resulting reduction in the defined benefit liability
is recognised as (negative) past service cost over the average period until
the reduced portion of the benefits becomes vested.