IE10 Plan C also has an IAS 19 surplus at the end of the reporting period of 50, which cannot be refunded to the entity under any circumstances. There are no unrecognised amounts. IE11 The nominal amounts of contributions required to satisfy the minimum funding requirements in respect of the shortfall and the future service for the next three years are set out below. Year Total contributions for minimum funding requirement Contributions required to make good the shortfall Contributions required to cover future service 1 135 120 15 2 125 112 13 3 115 104 11
Application of requirements IE12 The entity's present obligation in respect of services already received includes the contributions required to make good the shortfall but does not include the contributions required to cover future service. IE13 The present value of the entity's obligation, assuming a discount rate of 6 per cent per year, is approximately 300, calculated as follows: [120/(1.06) + 112 /(1.06) 2 + 104/(1.06) 3 ]. IE14 When these contributions are paid into the plan, the present value of the IAS 19 surplus (ie the fair value of assets less the present value of the defined benefit obligation) would, other things being equal, increase from 50 to 350 (300 + 50). IE15 However, the surplus is not refundable although an asset may be available as a future contribution reduction. IE16 In accordance with paragraph 20 of IFRIC 14, the economic benefit available as a reduction in future contributions is the sum of: (a) any amount that reduces future minimum funding requirement contributions for future service because the entity made a prepayment (ie paid the amount before being required to do so); and (b) the estimated future service cost in each period in accordance with paragraphs 16 and 17 , less the estimated minimum funding requirement contributions that would be required for future service in those periods if there were no prepayment as described in (a). IE17 In this example there is no prepayment as described in paragraph 20(a) . The amounts available as a reduction in future contributions when applying paragraph 20(b) are set out below. Year IAS 19 service cost Minimum contributions required to cover future service Amount available as contribution reduction 1 13 15 (2) 2 13 13 0 3 13 11 2 4+ 13 9 4 IE18 Assuming a discount rate of 6 per cent, the present value of the economic benefit available as a future contribution reduction is therefore equal to: (2)/(1.06) + 0/(1.06) 2 + 2/(1.06) 3 + 4/(1.06) 4 ... = 56.
Thus in accordance with paragraph 58(b) of IAS 19, the present value of the economic benefit available from future contribution reductions is limited to 56.
- Spring '13
- IFRIC, minimum funding requirement