Page 285 - F1 Integrated Workbook STUDENT 2018
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IAS 19 Employee benefits
Defined benefits plans
The pension payable on retirement normally depends on either the final salary or the
average salary of the employee during their career.
The employer undertakes to finance a pension scheme of a certain
amount, e.g. 2/3 × final salary × (years of service/40yr)
The employer has an ongoing obligation to make sufficient
contributions to fund the pensions
An actuary calculates the amount that must be paid into the plan
each year in order to provide the promised pension. The calculation
will be based on estimates such as life expectancy & inflation.
Therefore, the cost of providing pensions is not certain and varies
from year to year.
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