Deck 9: Employee Benefits

Question 1

The key difference between defined benefit and defined contributions post-employment plans is that:

A) the employee bears the risk in a defined benefit plan, whereas the employer bears the risk in a defined contribution plan.
B) the employer bears the risk in a defined benefit plan, whereas the employee bears the risk in a defined contribution plan.
C) the fund bears the risk in a defined benefit plan, whereas the employee bears the risk in a defined contribution plan.
D) the employer bears the risk in a defined benefit plan, whereas the fund bears the risk in a defined contribution plan.

Answer 1

B

Question 2

Which of the following types of employee benefits may be conditional upon the continuation of employment?

A) Annual leave.
B) Maternity leave.
C) Long service leave.
D) Accumulating non-vesting sick leave.

Answer 2

C

Question 3

Primrose Ltd employs 5 staff. Each staff member is entitled to 20 days annual leave per annum. Leave loading of 17.5% is paid when the leave is taken. At 1 July 2022 the balance in the provision for annual leave account was $14 028. Details of each employee's leave entitlement at 30 June 2023 are as follows:
$\begin{array}{|l|l|l|l|}\hline \text { Employee } & \text { Salary } & \begin{array}{l}\text { Days owing @ } \\1 / 7 / 22\end{array} & \begin{array}{l}\text { Days taken } \\\text { during year }\end{array} \\\hline \text { John Adams } & \$ 60000 & 15 & 22 \\\hline \text { Wendy Carter } & \$ 52000 & 4 & 20 \\\hline \text { Ken Murphy } & \$ 70000 & 20 & 25 \\\hline \text { Susan O'Leary } & \$ 58000 & 2 & 12 \\\hline \text { Marcus Thomson } & \$ 80000 & 6 & 15 \\\hline\end{array}$ There are 260 work days in a year. On 1 July each year all employees receive a 5% wage rise. There are no other wage rises given during the year.
The closing balance in the provision for annual leave account at 30 June 2023 is:

A) $13 454.
B) $14 127.
C) $15 808.
D) $16 599.

Answer 3

$16 599.

Question 4

North Quay Ltd employs 8 staff. Each staff member is entitled to 20 days annual leave per annum. Leave loading of 17.5% is paid when the leave is taken. On 31 December 20229 Margie Winton left the company and was paid out her untaken leave entitlements. Margie had 14 days leave owing at 1 July 2022 and took 6 days leave between 1 July and 31 December 2022. Her salary at the time of her departure was $80 000.
There are 260 work days in a year. On 1 July each year all employees receive a 2% wage rise. There are no other wage rises given during the year.
The gross entitlement owing to Margie Winton on 31 December 2022 was:

A) $5 538
B) $5 649
C) $6 638
D) $6 508

Question 5

An entity is required to recognise a liability for short-term compensated absences that are:

A) non-vesting only.
B) accumulating and vesting.
C) non-accumulating and vesting.
D) non-accumulating and non-vesting .

Question 6

Which of the following types of employee benefits are not covered by AASB 119/IAS 19?

A) Long service leave.
B) Wages.
C) Share-based payments.
D) Annual leave.

Question 7

Under AASB 119, leave entitlements that may be carried forward to a future financial period if unused are referred to as:

A) non-accumulating paid absences
B) accumulating unpaid absences
C) accumulating paid absences
D) non-accumulating unpaid absences

Question 8

Actuarial gains or losses can arise from:
I. Experience adjustments.
II. Employee services provided in future periods.
III. The withdrawal of changes to a defined benefit plan.
IV. Changes to actuarial assumptions.

A) I and II.
B) I and IV.
C) II and III.
D) III and IV.

Question 9

Which of the following statements regarding defined contribution plans is incorrect?

A) They include fixed contributions paid by the employer to an employee's superannuation fund.
B) The amount of the contribution is normally based on a percentage of the employee's wages.
C) The amount received by employees upon their retirement is dependent on the level of contributions made and the return earned by the fund on its investment.
D) The employer has a legal obligation to pay further contributions if the fund does not hold sufficient assets to pay it members.

Question 10

An increase in the present value of a defined benefit obligation resulting from employee service in the current period is referred to as:

A) the past service cost.
B) the asset ceiling.
C) the current service cost.
D) an actuarial gain or loss.

Question 11

If the amount paid to the defined contribution fund by an entity during the year is less than the amount payable in relation to service provided by employees, the entity must recognise:

A) an asset for the unpaid contributions.
B) an expense for the unpaid contributions.
C) a liability for the unpaid contributions.
D) a gain for the unpaid contributions.

Question 12

Benefits paid to members of a defined benefit post-employment fund are based on:
I. investment returns generated by the fund.
II. remuneration levels while employed.
III. number of years of service.
IV. the level of employer contributions made to the fund.

A) I and II only.
B) II and IV only.
C) II and III only.
D) III and IV only.

Question 13

An enterprise bargaining agreement results from an entity entering into an agreement with:

A) the government.
B) its employees.
C) the relevant industry body.
D) the relevant employee union.

Question 14

AASB 119 requires an entity to record a liability for long service leave:

A) when the leave is taken by the employee.
B) in a consistent manner from year to year.
C) when the employee becomes legally entitled to the leave.
D) as the employee provides service to the entity even though they may have no legal entitlement to the leave.

Question 15

Salary sacrificing refers to:

A) an employer withholding a portion of an employee's salary or wages for sub-standard performance.
B) an employee electing to forego some of their salary or wages in return for other non-cash benefits.
C) an employee not receiving a portion of their salary and wages due to the fact that pre-determined performance targets have not been met.
D) an employee foregoing some of their wages because leave entitlements such as sick leave have been overdrawn.

Question 16

Primrose Ltd employs 5 staff. Each staff member is entitled to 20 days annual leave per annum. Leave loading of 17.5% is paid when the leave is taken. At 1 July 2022 the balance in the provision for annual leave account was $14 028. Details of each employee's leave entitlement at 30 June 2023 are as follows:
$$\begin{array} { | l | c | c | c | } \hline \text { Employee } & \text { Salary } & \begin{array} { l } \text { Days owing @ } \\1 / 7 / 22\end{array} & \begin{array} { l } \text { Days taken } \\\text { during year }\end{array} \\\hline \text { Jahnu Adarns } & \$ 60000 & 15 & 22 \\\hline \text { Wendy Carter } & \$ 52000 & 4 & 20 \\\hline \text { Ken Muphy } & \$ 70000 & 20 & 25 \\\hline \text { Susar1 O'Leary } & \$ 58000 & 2 & 12 \\\hline \text { Marcus Thornson } & \$ 80000 & 6 & 15 \\\hline\end{array}$$ There are 260 work days in a year. On 1 July each year all employees receive a 5% wage rise. There are no other wage rises given during the year.
Annual leave payments made during the year were debited against the provision account. The total debit against the annual leave account during the year in relation to leave taken was:

A) $28 500
B) $19 334
C) $27 143
D) $20 301

Question 17

Employee benefits can arise from which of the following?
I. government legislation.
II. specific industry arrangements.
III. workplace agreements between an entity and its employees.
IV. enterprise bargaining agreements between an entity and the relevant employee union.

A) I and II only .
B) I, II and IV only.
C) I, II and III only.
D) I, II, III and IV.

Question 18

Treloar Ltd has 10 employees, who are each paid $750 per week for a 5 day working week. Each employee is entitled to 8 days accumulating non-vesting sick leave per year. At 1 July 2022 the accumulated untaken leave was 16 days in total. During the year ended 30 June 2023 a total of 50 days sick leave was taken, of which 8 days were unpaid leave.
Of the accumulated untaken leave at 30 June 2023 it is estimated that 75% of it will be taken during the following year.
The balance of the provision for sick leave at 30 June 2023 is:

A) $6 300
B) $8 100
C) $6 075
D) Nil, as the leave is non-vesting.

Question 19

Which of the following is not an example of a short-term employee benefit?

A) Termination payments.
B) Wages and salaries.
C) Sick leave and annual leave.
D) Bonuses and profit-sharing arrangements.

Question 20

In the event that an employer pays an amount to the defined contribution fund that is less than the amount payable:

A) an asset is to be recognised at the end of the reporting period for the unpaid contributions.
B) an asset is to be recognised to the extent that the entity is entitled to a refund or a reduction in future contributions.
C) a liability is to be recognised at the end of the reporting period for the unpaid contributions.
D) a liability is to be recognised to the extent that the entity is entitled to a refund or a reduction in future contributions.

Question 21

The nominal value of an accumulated benefit for long service leave is calculated as (Years of employment/Years required for LSL) x (weeks of paid leave/52) x _____ __.

A) current salaries
B) projected salaries
C) current salaries / (1+inflation rate)n
D) projected salaries x (1+inflation rate)n

Question 22

When an entity decides to terminate an employee's employment, the offer to pay termination benefits can no longer be withdrawn when the entity has communicated to affected employees a plan of termination that meets which of the following criteria?

A) The plan identifies the location, function or job classification, the number of employees whose services are to be terminated, and the expected completion date.
B) Actions required to complete the plan indicate that significant changes to the plan are unlikely.
C) The plan establishes the termination benefits payable in sufficient detail to enable employees to determine the type and amount of benefits they will receive.
D) All of the above.

Question 23

AASB 119 adopts the projected unit credit method for the measurement of long service leave obligations. This method requires the entity to:

A) calculate the future value of the expected payments that will result from employee services provided in the future.
B) calculate the present value of the expected future payments that will result from employee services provided to date.
C) provide for the amount of long service leave that is planned to be taken by employees within the next 12 months.
D) commence providing for long service leave once employees have completed 10 years of service.

Question 24

Which of the following does not fall within the definition of a termination benefit?

A) Employee resignation.
B) Voluntary redundancy accepted by an employee.
C) An entity's decision to termination employment before an employee's normal retirement date.
D) An entity's decision to undertake a redundancy program due to restructuring.

Question 25

An entity is required to make several estimates when measuring the liability for long service leave. These estimates include:

A) the number of employees expected to become eligible for long service leave.
B) the projected wages and salaries at the time the long service leave is expected to be paid.
C) when the leave will be taken by eligible employees.
D) all of the above.

Question 26

Which of the following obligations do not arise from past services provided by an employee?

A) Termination benefits.
B) Post-employment benefits.
C) Short-term compensated absences.
D) Other long-term employee benefits.

Question 27

The key steps involved in accounting by the employer for a defined benefit post-employment fund in accordance with AASB 119 include:
I. Determining the deficit or surplus of the fund
II. Determining the amount of the net defined benefit liability (asset)
III. Determining the amounts to be recognised in profit or loss
IV. Determining the remeasurements of the net defined benefit liability (asset) to be recognised in other comprehensive income

A) I, II and III only
B) I, III and IV only
C) II, III and IV only
D) I, II, III and IV

Question 28

An entity is able to record a provision for termination benefits when it:

A) has developed a formal plan for redundancies.
B) has decided to undertake a termination program.
C) can no longer withdraw the offer of the benefits.
D) has received Board approval for the termination benefits.