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AASB 119 - Employee Benefits - August 2015
64When an entity has a surplus in a defined benefit plan, it shall measure the net defined benefit asset at the lower of:
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64 When an entity has a surplus in a defined benefit plan, it shall measure the net defined benefit asset at the lower of:
(a) the surplus in the defined benefit plan; and
(b) the asset ceiling, determined using the discount rate specified in paragraph 83.
65 A net defined benefit asset may arise where a defined benefit plan has been overfunded or where actuarial gains have arisen. An entity recognises a net defined benefit asset in such cases because:
(a) the entity controls a resource, which is the ability to use the surplus to generate future benefits;
(b) that control is a result of past events (contributions paid by the entity and service rendered by the employee); and
(c) future economic benefits are available to the entity in the form of a reduction in future contributions or a cash refund, either directly to the entity or indirectly to another plan in deficit. The asset ceiling is the present value of those future benefits.
Recognition and measurement: present value of defined benefit obligations and current service cost
66 The ultimate cost of a defined benefit plan may be influenced by many variables, such as final salaries, employee turnover and mortality, employee contributions and medical cost trends. The ultimate cost of the plan is uncertain and this uncertainty is likely to persist over a long period of time. In order to measure the present value of the post-employment benefit obligations and the related current service cost, it is necessary:
(a) to apply an actuarial valuation method (see paragraphs 67–69);
(b) to attribute benefit to periods of service (see paragraphs 70–74); and
(c) to make actuarial assumptions (see paragraphs 75–98).
Actuarial valuation method
67 An entity shall use the projected unit credit method to determine the present value of its defined benefit obligations and the related current service cost and, where applicable, past service cost.
68 The projected unit credit method (sometimes known as the accrued benefit method pro-rated on service or as the benefit/years of service method) sees each period of service as giving rise to an additional unit of benefit entitlement (see paragraphs 70–74) and measures each unit separately to build up the final obligation (see paragraphs 75–98).