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Exam 13: Accounting for Employee Benefits

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Question 31

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In Australia, employee entitlements are protected in the case of company insolvency because:

A) Employees are given first priority for payment after the taxation department and the company administrators.
B) Employees are given some preferential access to payment, but after secured creditors.
C) ASIC monitors companies' annual reports to ensure that their assets are greater than the total secured debt and employee entitlements.
D) Employees are encouraged to withdraw their labour in the case of a company beginning to fail in order to minimise their loss of employee entitlements.
E) None of the given answers.

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Question 32

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Great Keppel Ltd provides defined superannuation benefits to two (2) of its employees which represents an entitlement of three times their final salary on retirement. The company's superannuation plan is managed by Better Super Funds. The following details are relevant to the superannuation obligation of the company for the years ended 30 June 2011 and 2012: Which of the following course of actions should Great Keppel Ltd take to comply with the accounting treatment on superannuation prescribed in AASB 119 "Employee Benefits" in preparation of the financial statements for the year ending 30 June 2012?

A) No action necessary as the contribution of $10,000 was remitted to better Super Ltd.
B) No action necessary as the assets and liabilities of the superannuation for its employees are managed by Better Super Ltd.
C) Recognise a superannuation obligation of $13,390 being the difference between ending balance of plan assets and the present value of superannuation obligation as at 30 June 2012.
D) Recognise a superannuation expense of $38,390 for the year 2012 being the difference between beginning and ending balance of the present value of superannuation obligation.
E) None of the given answers.

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Question 33

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Entity A contributes to a defined benefit superannuation plan for its employees. It calculates the following: Current service cost 12,785 Interest cost 983 Expected return on plan assets (1,150) Net actuarial gain recognised in period (1,835) 10,783 The 'Expected return on plan assets (1,150) ' represents:

Employees generally receive superannuation entitlements as part of their employment agreements. Thus usually involves the employer transferring funds to an independent superannuation fund that is administered by an independent trustee:

In a long service leave liability, conditional period is period during which an employee gains legal entitlement to pro rata payment.

An employee whose contract for service includes an entitlement to 1 week's cumulative sick leave per annum will be entitled to how many weeks' sick leave after 3 years' employment if no sick leave has been taken?

Non-vesting sick leave that has accumulated will be paid to employees when their employment ceases:

Suggested approaches to improving the financial security of employees in the case of the collapse of their employer include:

Post-employment benefits include:

The expense recognised by an employer for a defined benefit superannuation plan:

If there is no deep market for high quality corporate bonds, AASB 119 "Employee Benefits" permits the use of market yields on government bonds as a discount rate to determine the present value of a defined benefit obligation.

Kerry Gill works for Kentucky Enterprises for an annual salary of $60,000. Kerry is entitled to 4 weeks' annual leave per year with a leave loading of 17.5 per cent. What entry each week, additional to the one recording wages expense and PAYG tax deduction, would be required to accrue Kerry's entitlement to annual leave? When Kerry takes his 4 weeks' annual leave, what entry would be made to record this (only) ? The tax is calculated at 30 per cent. (Assume that there are 52 weeks in a year and round to the nearest dollar.)

AASB 119 defines 'employee benefits' as:

AASB 119 divides employee benefits into a number of categories, including:

The amount represented as a current liability, 'Provision for Long-Service Leave' generally represents:

Dervish Ltd has an average weekly payroll of $700 000. The employees are entitled to 2 weeks', non-vesting sick leave per annum. Past experience suggests that 66 per cent of employees will take the full 2 weeks' sick leave and 15 per cent will take 1 week's leave each year. The rest of the employees take no sick leave. What weekly entry would Dervish make in relation to sick leave?

Annette French joined Paris Ltd on 1 July 2011 as a bookkeeper. She is the only permanent employee of Paris Ltd. On 30 June 2012 her salary was $35,000. Annette French's salary is expected to increase with inflation at a rate of 3%. Paris Ltd provides long service leave entitlement of 13 weeks after 15 years of service. A pro rata payment is made after 10 years of service. The probability of Annette French staying in the job until the obligation vests is 35%. Other information: What is the long service leave liability (to the nearest $) of Paris Ltd as at 30 June 2012?

AASB 119 "Employee Benefits" prescribes that all obligations relating to wages and salaries, annual leave and sick-leave entitlements, regardless of whether they were expected to be settled within 12 months of the reporting date be measured at nominal (undiscounted) amounts.

Entity A contributes to a defined benefit superannuation plan for its employees. It calculates the following: Current service cost 12,785 Interest cost 983 Expected return on plan assets (1,150) Net actuarial gain recognised in period (1,835) 10,783 The $10,783 represents:

Mackay Ltd provides defined superannuation benefits to two (2) of its employees which represents an entitlement of three times their final salary on retirement. The following details are relevant to the current superannuation obligation of the company for the two employees for the years ended 30 June 2011 and 2012: In accordance with AASB 119 "Employee Benefits", what is the interest cost and actuarial gain (loss) for the defined benefit obligation for the year ending 2012?