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Chapter 8

3.3 Asset ceiling

If a defined benefit plan is in surplus, IAS 19 states that the asset reported in the
statement of financial position must be measured at the lower of:

 the amount calculated as normal

 the present value of the economic benefits available to the entity in the form of
refunds or reduced pension contributions.

This ensures that the surplus recognised in the financial statements meets the
definition of an 'asset' (a resource controlled by the entity that will lead to a probable
inflow of economic benefits).

If the plan surplus does need to be reduced then the loss is recognised in other
comprehensive income as part of the remeasurement component.

Illustrations and further practice

Now try TYU 6 from Chapter 8

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