Page 255 - Group Insurance and Retirement Benefit IC 83 E- Book

204 AS 15

enterprise has a defined benefit obligation with a net present value
of Rs. 1,000 and plan assets with a fair value of Rs. 820 and
unrecognised past service cost of Rs. 50. The curtailment reduces
the net present value of the obligation by Rs. 100 to Rs. 900.

Of the previously unrecognised past service cost, 10% (Rs. 100/
Rs.1000) relates to the part of the obligation that was eliminated
through the curtailment. Therefore, the effect of the curtailment is
as follows:

(Amount in Rs.)
Before Curtailment After
Curtailment gain curtailment

Net present value of obligation 1,000 (100) 900

Fair value of plan assets (820) - (820)

180 (100) 80

Unrecognised past service cost (50) 5 (45)

Net liability recognised in
balance sheet 130 (95) 35

Provided that a Small and Medium-sized Company, as defined in
the Notification, may not apply the recognition and
measurement principles laid down in paragraphs 50 to 116 in respect
of accounting for defined benefit plans. However, such a company
should actuarially determine and provide for the accrued liability in
respect of defined benefit plans as follows:

• The method used for actuarial valuation should be the Projected
Unit Credit Method.

• The discount rate used should be determined by reference to
market yields at the balance sheet date on government bonds as
per paragraph 78 of the Standard.