Pension Scheme 1 Chinese and English Bilingual

Section B-TWO questions ONLY to be attempted

(a)Accounting for retirement benefits remains one of the most challenging areas in financial reporting. The values being reported are significant, and the estimation of these values is complex and subjective. Standard setters and preparers of financial statements find it difficult to achieve a measure of consensus on the appropriate way to deal with the assets and costs involved. SSAP24 Accounting for Pension Costs' focused on the profit and loss account, viewing retirement benefits as an operating expense. However, FRS17 Retirement Benefits' concentrates on the balance sheet and the evaluation of the pension fund. The philosophy and rationale of the two statements are fundamentally opposed. Required: (i)Describe four key issues in the determination of the method of accounting for retirement benefits in respect to of defined benefit plans; Discuss how FRS17 Retirement Benefits' deals with these key issues and to what extent it provides solutionsto the problems of accounting for retirement benefits.

Part B-2 Attempt Only Questions
(a) Retirement Benefit AccountingStill Financial One of the most challenging areas of reporting. The values ​​reported are significant, and estimation of these values ​​is complex and subjective. Standard setters and financial statement preparers find it difficult to achieve a level of consensus on the appropriate way to treat the assets and costs involved. SSAP24 PensionPension cost accounting pays more attentionto the profit and loss account and combines retirement benefits with Considered an operating expense. However, the focus of FRS17 retirement benefits is on the balance sheet andvaluation of pension funds. The philosophies and rationales of these two statements are fundamentally opposed. Required: (i) Explain the four key issues when determining the pension accounting method for defined benefit plans; Discuss how FRS17 Retirement Benefits addresses these key issues and the extent to which it provides solutions to retirement benefit accounting issues.

ChatGPT answered:

Accounting for retirement benefits, especially in the context of defined benefit plans, involves several key issues:

1. Measurement of the Obligation: The calculation of the pension obligation involves actuarial assumptions about demographic variables (like employee turnover and mortality) and financial variables (like future salary increases, the rate of return on plan assets, and discount rates for present valuing future obligations). These assumptions can have a significant impact on the size of the reported obligation.

2. Recognition and Timing of Expenses: Deciding when to recognize the costs associated with pension benefits can be complex. It involves determining the period over which the costs should be recognized, which could be during the employees’ working lives, at the time the pensions are paid, or some other period.

3. Valuation of Plan Assets: Defined benefit plans often involve investments intended to fund the future obligations. The measurement of these plan assets at fair value, which can fluctuate based on market conditions, adds to the complexity.

4. Presentation in Financial Statements: How pension costs and obligations are presented in financial statements, whether in the profit and loss account or on the balance sheet, affects the perceived financial position and performance of the entity.

FRS17 'Retirement Benefits' aims to address these issues as follows:

The accounting for retirement benefits, particularly in the context ofdefined benefit plans, involves several key issues:

1. Measurement of obligations: The calculation of pension obligations involves demographic variables (such as employee turnover and mortality rates

< a i=6>) and actuarial assumptions for financial variables such as future wage growth, rates of return on plan assets, and discount rates for present value future obligations. These assumptions may have a significant impact on the size of reporting obligations. 2. Recognition and timing of expenses: Determining when to recognize costs associated with pension benefits can be complex. It involves determining the period during which costs should be recognized, whether during the employee's employment, when pension payments are made, or some other period.

3. Valuation of plan assets: Defined benefit plans typically involve investments designed to fund future obligations. The fair value of these plan assets may fluctuate based on market conditions, which adds complexity.

4. Presentation in financial statements: How pension costs and obligations are presented in financial statements, Whether it is in the income statement or the balance sheet, it affects the financial position and performance of the entity.

FRS17 "Retirement Benefits" aims to address these issues as follows:

• It requires the pension scheme liabilities to be measured on an actuarial basis using the projected unit method, which anticipates future salary increases. This provides a more realistic measure of the company’s obligations.

• The standard mandates that the expected costs of providing pensions to employees are recognized over the period that the company benefits from the employees' services, which aligns the expense recognition with the earning period of the benefits.

• FRS17 also requires the assets of the pension fund to be measured at fair value, reflecting current market conditions. This fair value must be disclosed in the financial statements, which improves transparency.

• The standard stipulates that full disclosure of the retirement benefit costs and obligations should be provided on the balance sheet, rather than just through the profit and loss account. This shift ensures that the financial statements more accurately reflect the company's financial status by recognizing all known liabilities and the resources set aside to meet them.

In essence, FRS17 provides a framework that aims to give a true and fair view of an entity's retirement benefit obligations and the resources available to meet them, making the financial statements more useful for users. However, the standard also introduces volatility into the financial statements due to the requirement to measure plan assets and liabilities at fair value, which can fluctuate over time.

It requires that pensions be measured on an actuarial basis using the projected unit method of projected future wage growth Plan Liabilities. This provides a more realistic measure of a company’s obligations. The Code states that the expected cost of providing a pension to an employee should be within the period during which the company benefits from the employee’s service Recognition, thereby aligning expense recognition with the period in which benefits are earned. FRS17 also requires pension funds’ assets to be measured at fair value, reflecting current market conditions. This fair value must be disclosed in the financial statements, thus increasing transparency. The standard provides that retirement benefit costs and obligations should be fully disclosed on the balance sheet and not just through Profit and Loss Statement. This shift ensures that financial statements more accurately reflect a company's financial position by recognizing all known liabilities and the resources set aside to meet those liabilities. In essence, FRS17 provides a framework designed to truly and fairly reflect an entity’s retirement benefit obligations and the resources available to meet these obligations, thereby making the financial statements more useful to users. However, the standard also introduces volatility into financial statements by requiring that plan assets and liabilities be measured at fair value, which can fluctuate over time.

FRS 17 deals with the accounting treatment of defined contribution pension schemes and defined benefit pension schemes.

Chinese (Simplified)

FRS 17 relates todefined contribution pension plansanddefined benefit pension plans >Accounting treatment of .

According to the content of the picture, the original text is as follows:

(b) A, a public limited company, operates a defined benefit pension scheme. A full actuarial valuation by an independent actuary revealed that the value of the pension liability at 31 May 2000 was £1,500 million. This was updated to 31 May 2001 by the actuary and the value of the pension liability at that date was £2,000 million. The pension scheme assets comprised mainly UK bonds and equities and the market value of these assets was as follows:

31 May 2000 31 May 2001 £m £m Fixed interest and index linked bonds (UK) 380 600 Equities (UK) 1,300 1,900 Other investments 290 450 1,970 2,950

The pension scheme had been altered during the year with improved benefits arising for the employees and this alteration had been taken into account by the actuaries. The increase in the actuarial liability in respect of employee service in prior periods was £25 million (past service cost). The increase in the actuarial liability resulting from employee service in the current period was £70 million (current service cost).

The company had paid contributions of £60 million to the scheme during the period. The company expects its return on the pension scheme assets at 31 May 2001 to be £295 million and the interest on pension liabilities to be £225 million.

The company anticipates that a deferred tax liability will arise on the surplus in the scheme. Assume Corporation Tax is at a rate of 30 per cent.

Required: (i) Show the amount which will be shown as the net pension asset/pension reserve in the balance sheet of A plc as at 31 May 2001 under FRS17 ‘Retirement Benefits’; (comparative figures are not required). (4 marks) (ii) Show a reconciliation of the movement in the pension surplus during the year stating those amounts which would be charged to operating profit and the amounts which would be recognised in the Statement of Total Recognised Gains and Losses (STRGL), utilising FRS17 ‘Retirement Benefits’. (7 marks)

(25 marks)

(b) Company A, a public limited company, operates a definedbenefit pension schemebenefit pension scheme. A full actuarial valuation carried out by an independent actuary showed that the value of pensionliabilities as at 31 May 2000 was £1.5 billion. The actuary updated the figures on May 31, 2001, and the value of pensionliabilities was £2 billion. Pension scheme assets consist mainly of UK bonds and equities and the market values ​​of these assets are as follows:

31 May 2000 31 May 2001 £m £m Fixed interest and index-linked bonds (UK) 380 600 Equities (UK) 1,300 1,900 Other investments 290 450 Total 1,970 2,950

Last year, changes were made to the pension plan that resulted in better benefits for employees, and the actuaries have taken these changes into consideration. Actuarial liabilities arising from employees' services in prior periods increased by £25m (past service costs). Actuarial liabilitiesincreased by £70 million as a result of employees' services in the current period (current service costs).

Companies paid a £60m contribution to the scheme during the period. The company expects a return on pension scheme assets of £295 million and interest on pension liabilities of £225 million as at 31 May 2001.

The Company expects that surpluses in the pension plan will result indeferred income tax liabilities. Assume the corporate tax rate is 30%.

Requirements: (i) According to FRS17 "Retirement Benefits", what is the amount of net pension assets/pension reserves that will be shown in Company A's balance sheet as of May 31, 2001; (no comparison of figures is required). (4 points)

(ii) Showa reconciliation of changes in pension surplus during the year, indicating which amounts will be included in operating profit and the What amounts will be recognized in the Statement of Gains and Losses (STRGL) is explained using FRS17 Retirement Benefits. (7 points)

(Total 25 minutes)

Please wait a moment, I will first read the content of the picture you uploaded, and then answer the pension calculation accounting question in the picture for you in Chinese.

Based on the information provided in the picture, we need to complete two tasks:

(i) According toFRS17 "Retirement Benefits", as of May 31, 2001, Company A's balance sheet will show The amount of net pension assets/pension reserves. (ii) Reconciliate changes in pension surplus during the year and explain which amounts will be included in operating profit and which amounts will be recognized in the Statement of Total Recognized Gains and Losses (STRGL), using FRS17 Retirement Benefits.

Let’s answer them one by one in Chinese.

(i) Thenet pension assets/reserve amount at May 31, 2001 is calculated as follows:

• Market value of pension scheme assets = 600m + 1,900m + 450m = £2,950m
• Pension liability = £2,000m
• Net pension assets/reserves = market value of pension scheme assets - pension liabilities = £2,950m - £2,000m = £950m

So, on the balance sheet it will show£950m as net pension assets/provisions.

(ii) Reconciliation for changes in pension surplus during the year is as follows:

• Market value of pension scheme assets at the beginning of the period = £1,970m
• Market value of pension scheme assets at end of period = £2,950m
• Increase in pension scheme assets = £2,950m - £1,970m = £980m
• Company contribution to scheme assets = £60m
• Company expected return on scheme assets = £295m
• Company's interest cost on pension liabilities = £225m
• Past service cost = £25m
• Current service cost = £70m
• Actual return on pension scheme assets = £2,950m - £1,970m - £60m = £920m
• Pension surplus = £920m - £295m - £225m - £25m - £70m = £305m

The portion of the adjusted pension surplus that will be included in operating profit is current service costs of £70m and interest costs of £225m. The portion that will be recognized in STRGL includes the past service cost of £25m and the difference between the actual return on the scheme assets and the expected return, i.e. £920m - £295m = £625m.

Note that this calculation does not include potentialdeferred tax effects. Assuming the company's tax rate is 30%, then based on a pension surplus of £305m, the expected deferred tax liability is £91.5m (i.e. £305m * 30%). This will be consideredas a deduction on the balance sheet.

PENSION SCHEMES - EXAMPLE 1
W1
						£m
Pension scheme assets at 31-5-01						2950
Actuarial value of liability精算负债						-2000
Pension scheme surplusPension scheme surplus						950
Deferred tax liability at 30% Deferred tax liability						-285
Net pension scheme asset at 31-5-01						665
W2
						£m
Surplus in scheme at 1-6-00  (1970 - 1500)						470
Past service cost						-25
Current service cost						-70
Contributions into scheme						60
Expected return on assets						295
Interest on liabilities						-230
Actuarial gain in the year精算盈利						450	Bal fig
Surplus in scheme at 31-5-01 (2950 - 2000)						950

 

This table is an example of a typical pension plan, showing the assets, liabilities and surplus of the pension plan. Below I'll explain what each item means:

W1 - Pension Plan Surplusand Net Assets

1. Pension scheme assets at 31 May 2001 (£m 2950): This refers to all assets in the company’s pension scheme (e.g. bonds, < a i=2>The total market value of stocks, other investments).

2. Actuarial liability (-£m 2000): The company’s present value liability for future pension payments, usually calculated by an actuary.

3. Pension scheme surplusPension scheme surplus(£m 950): This is the pension scheme The balance after assets minus actuarial liabilities is surplus.

4. Deferred tax liability at 30%Deferred tax liability at 30% (-£m 285): Deferred tax liabilities expected to be incurred based on pension plan surpluses. It is calculated by multiplying thesurplus amount by thetax rate. = 950 x 30%

5. Net pension scheme assets as at 31 May 2001 (£m 665): The net asset value of a pension scheme after deducting expected deferred tax liabilities.

W2 - Changes in Pension Plan Surplus

1. Surplus in the scheme at 1 June 2000 (1970 - 1500 = £m 470): The surplus of the pension scheme at the end of the previous year, calculated as pension scheme assets Less actuarial liabilities.

2. Past service cost (-£m 25): The cost of increasing the actuarial liability as a result of past increases in pension benefits.

3. Current service cost (-£m 70): Pension cost corresponding to employee service in the current year.

4. Contribution to scheme (£m 60): The amount of money paid into the pension scheme by the company during the year.

5. Expected return on assets (£m 295): Expected return on investment of pension scheme assets during the year.

6. Interest on liabilities (-£m 230): The interest cost incurred on pension scheme liabilities during the year.

7. Actuarial profit during the year (£m 450, balance figure): Refers to the excess of the actual value of pension plan assets over the expected calculated value due to changes in market value and other factors.

8. Surplus in the scheme at 31 May 2001 (2950 - 2000 = £m 950): Pension scheme surplus at the end of the year, calculated as pension scheme assets less actuarial Liabilities.

These calculations reflect the financial changes in a pension plan during a year and are an important part of accounting and financial reporting used to determine a company's financial position with respect to its pension plan.

BALANCE SHEET AT 31 MAY 2001
(STATEMENT OF FINANCIAL POSITION)
		£m
Net Pension Scheme Asset (W1)净养老金计划资产		665
PROFIT AND LOSS ACCOUNT FOR YEAR ENDED 31 MAY 2001
(INCOME STATEMENT)
		£m
Administrative expenses   W2		95	(25 + 70)
Interest receivable W2		65	(295 - 230)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES总认可收益和损失表
(STATEMENT OF TOTAL COMPREHENSIVE INCOME)总综合收益表）
		£m
Actuarial gain(W2)精算盈利		450

以下是表格的中文翻译：

截至2001年5月31日的资产负债表
（财务状况表）
金额（百万英镑）

净养老金计划资产 (W1) 665

截至2001年5月31日的损益表
（收入表）
金额（百万英镑）

管理费用 (W2) 95 （25 + 70）
利息收入 (W2) 65 （295 - 230）

总认可收益和损失表
（总综合收益表）
金额（百万英镑）

精算盈利 (W2) 450

在这个表格中，“W1”和“W2”是工作底稿的标记，分别代表不同的计算和分析过程。这些工作底稿通常包含了详细的计算步骤，以支持表格中给出的最终数字。

 

这个表格是关于截至2001年5月31日的资产负债表（财务状况表）、损益表（收入表）以及总认可收益和损失表（总综合收益表）的一部分。下面我将详细解释表格的每一项：

资产负债表截至2001年5月31日

1. 净养老金计划资产 (W1) - £m 665: 这是公司资产负债表上显示的金额，代表公司养老金计划的净资产。这是根据工作底稿W1计算出的，养老金计划资产减去负债和递延税后的余额。

损益表截至2001年5月31日

1. 管理费用 (W2) - £m 95  (25 + 70): 这一部分反映了公司损益表中的管理费用，包括了过去服务成本£25m和当前服务成本£70m。这些是公司在本财务年度内，根据工作底稿W2，需认为养老金计划所承担的成本。

2. 利息收入 (W2) - £m 65 (295 - 230): 这表示公司在财务年度内从养老金计划资产中获得的预期回报（£295m），减去对养老金负债的利息成本（£230m），得到的净利息收入。

总认可收益和损失表

1. 精算盈利 (W2) - £m 450: 这项反映了公司在财务年度内，养老金计划资产的市场价值相比精算预期有所增加，实现的精算盈利。这不计入损益表，而是直接计入股东权益，体现在总认可收益和损失表中。

现在，让我们返回图片中的问题来进行解读。图片中的问题要求我们：

(i) 根据FRS17《退休福利》，展示截至2001年5月31日的A公司资产负债表中将显示的净养老金资产/养老金准备金金额。

(ii) 展示一年内养老金盈余变动的调节，并说明哪些金额会计入营业利润，哪些金额会在总认可收益和损失表中被确认，使用FRS17《退休福利》进行说明。

基于上面的表格解释：

(i) 净养老金计划资产是£665m，这将在资产负债表中显示。

(ii) 损益表将显示作为管理费用的£95m（包括过去服务成本和当前服务成本）和作为利息收入的£65m。而总认可收益和损失表将显示精算盈利£450m。这些项目分别体现了养老金计划在财务报告中的不同方面，按照FRS17的要求进行了适当处理。

(a) (i)There are many issues surrounding the determination of the method of accounting for retirement benefits, The main objectives ofrecent accounting standarcds internationally and FRS 17 "Retirement Benefits' have been to ensure that the financial statemnentsreflecthe assets and liabilities (and changes in values therein) arising from an employers retirement benefit obligations and thatthe respective operating costs are recognised in the accounting period, Thus one key issue is whether the accounting objectiveshouid be to view pensions as an operating expense and seek to provide for the projected cost over the pensioner's years ofemployment thus applying the matching concept and focusing on the profit and loss account or to concentrate on the caiance sneeand uVari?usrent values Other issues which require attention are as follows:

(1)The determination of the pension expense确定养老金费用: there is a need to establish an apprcach for the recognition anddmand measurementhe retirement benefit expense. The question arises as to the method to be used. A cash oraccruals basis could be adopted, or one based upon a funding objective whereby assets are built up in thescheme

(2)Valuation of Plan Assets计划资产的评估: the question arises as to whether plan assets should be recoerecognised he balance sheetas if the assets "belong to the company. This premise is questionable in law and in terms of economic realityAdditionally at what value should these assets be recognised. Varius suggestions include market value approaches or fair values.

3.Measurement of Plan liabilities计划负债的衡量: the scheme liabilities need to be valued using an actuarial or market vaiue(iapproach. As there is no active market for most defined benefit scheme liabilities, actuarial techniques have to ceused. However, there are two alternative actuarial methods which could be used - the accrued benefits methogsor prospective benefits methods. The main difference between them is the treatment of the time value cf money

4)Freauency of actuarial valuations精算评估的频率: the potentia problern for companies is the onerous nature of such valuaticnsand the impracticality for preparers of financial statements.

5) Recognition of actuarial gains and losses精算收益和损失的确认: the auestion arises as to whether these gains and osses shouid berecognised oyer the service lives of the emoloyees or recorded in the Statement of Total Recognised Gains anoLosses or recognised in the profit and loss account if they exceed a precetermined amount. The problern facingstandard setters is how to deal with any volatility that may arise as a result cf actuarial gains and losses

(6)Plan amendments计划修正: the decision to improve benefits or award new benefits in relation to past service increases thescheme's liability immediately. The question arises as to how the cost shouid be recognised in the perforniancastatements. The cost could be offset against any surplus in the scheme, or recognised over the remaining servicelives of current employees or immnediately recognised in the profit and loss accountThere are other issues which could be mentioned. For example the nature cf any discount rate used, or the date oi theactuarial valuation. Candidates need only mention four of the above issues

(a) (i) 确定退休福利会计处理方法的问题有很多。国际上最近的会计准则和FRS 17《退休福利》的主要目标是确保财务报表反映了雇主退休福利义务产生的资产和负债（及其价值变化），并且相应的运营成本在会计期间被确认。因此，一个关键问题是会计目标是否应该将养老金视为经营费用，并寻求提供养老金成本的预测，从而应用匹配概念并关注损益表，或者集中在资产负债表上使用当前值。

需要关注的其他问题包括：

• 1.确定养老金费用determination of the pension expense：需要建立一个方法来认定和衡量退休福利费用。问题是应使用何种方法。可以采用现金或权责发生制，或者基于资金目标，通过计划在计划中积累资产。
• 2.计划资产的评估Valuation of Plan Assets：问题是计划资产是否应该在资产负债表上确认，就好像这些资产“属于公司”。这一前提在法律和经济实际中是有疑问的。此外，这些资产应以何种价值被确认。不同的建议包括市场价值方法或公平价值。
• 3.计划负债的衡量：计划负债需要使用精算或市场价值方法来评估。由于大多数确定福利计划负债没有活跃市场，因此必须使用精算技术。然而，有两种替代的精算方法可以使用 - 累积福利方法或预期福利方法。它们之间的主要区别是处理货币时间价值。
• 精算评估的频率：公司潜在的问题是这种评估的繁重性质以及财务报表编制者的不切实际。
• 5.精算收益和损失的确认：问题是这些收益和损失应该在员工的服务年限内被确认，还是记录在总认可收益和损失表中，或者在超过预定金额时在损益表中确认。标准制定者面临的问题是如何处理由于精算收益和损失可能产生的任何波动。
• 6.计划修正：改善福利或授予与过去服务相关的新福利的决定立即增加计划的负债。问题是性能报表中应如何确认成本。成本可以抵消计划中的任何盈余，或者在现有员工的剩余服务年限内确认，或者立即在损益表中确认。还有其他问题可以提及。例如使用的任何贴现率的性质，或精算评估的日期。 候选人只需提及以上四个问题中的任何四个。

FRS 17是什么的缩写

ChatGPT

ChatGPT

FRS 17是英国财务报告准则17（UK Financial Reporting Standard 17）的缩写，它涉及退休福利的处理。FRS 17引入了一个重要要求，即在赞助雇主的资产负债表中确认和披露养老基金赤字和盈余的完整金额。该准则适用于2014年12月31日或之前开始的报告期。自2015年1月1日起，员工福利的报告由FRS 102的第28节覆盖​​。