Deck 12: Accounting for Employee Benefits

Question 1

Slater is entitled to 4 weeks annual leave a year and has four weeks leave,to the value of $20 000,accrued at the end of his first year of employment.On the first day of his second year of service Slater is given a pay rise to bring his salary up to $300 000 per annum.After the pay rise,Slater's annual leave payable must be adjusted by:

A) $50 000
B) $3077
C) $23 077
D) No adjustment is necessary

Answer 1

B

Question 2

Under AASB 119,the recognition criteria for liabilities for profit sharing and bonus plans is:

A) It is probable the liability will be settled and the amount of the liability can be measured consistently
B) It is reasonably certain the liability will be settled
C) It is probable the liability will be settled
D) The entity has a present legal or constructive obligation to settle the liability, and the amount of the liability is capable of being measured reliably

Answer 2

D

Question 3

The discount rate to be used when estimating future cash outflows relating to an employee benefit that is expected to be paid out in 20 years by a Sydney company should be restricted to:

A) the current yield on 20 year Australian Government Bonds
B) the current yield on high quality bonds
C) no estimation of future cash outflows is required
D) none of the above

Answer 3

A

Question 4

AASB 119 specifies that the present value basis of measurement of liabilities arising from employee benefits must be applied to which of the following?

A) Short term employee benefits
B) Long term employee benefits
C) Long service leave only
D) All employee benefits

Question 5

Wages and salaries can be divided into which two parts?

A) Current and long-term
B) Monetary and non-monetary
C) Current and in arrears
D) Cash and short-term benefits

Question 6

The timing of the recognition of an expense and liability is based on the date:

A) when the entity can no longer withdraw for the offer of those benefits
B) when the entity recognises costs for a restructuring that is within the scope of AASB 137
C) of the most recent financial statements
D) the earlier of A or B

Question 7

According to AASB 2,how is the reporting entity to measure the good or services acquired for cash-settled share-based payment transactions?

A) Fair value of the asset
B) Book value of the asset
C) Fair value of the liability
D) Book value of the liability

Question 8

The journal entry to record the payment of long service leave to an employee is:

A) Dr. Liability for long service leave
Cr Bank

B) Dr Bank
Cr Liability for long service leave

C) Dr Long service leave expense
Cr Bank

D) None of the above

Question 9

Which of the following is not a period of employment for long-service leave purposes?

A) Apprenticeship
B) Preconditional
C) Conditional
D) Unconditional

Question 10

How should a reporting entity account for the fair value of a compound instrument?
Debt Component Equity Component

A) Cash-settled Cash-settled
B) Equity-settled Cash-settled
C) Equity-settled Equity-settled
D) Cash-settled Equity-settled

Question 11

Entitlement of equity instruments are based on:

A) Earnings goals
B) Vesting conditions
C) Debt ratios
D) Return on investment ratios

Question 12

Under AASB 119,the liability for annual leave is calculated at:

A) the present value of the estimated future cash outflows to be made in respect of the leave
B) the current pay rate
C) the anticipated pay rate when the leave is expected to be taken
D) none of the above

Question 13

Discuss the rationale for AASB 119 recognising long service leave as a liability during the preconditional period.How would you account for the possibility that an employee may not remain in your employ long enough to collect long service leave.

Question 14

Which of the following is not an objective related to disclosures of share-based payment transactions?

A) Disclosure of percentage of equity and cash payouts to employees
B) Highlights the effects of share-based payment transactions on a company's profit or loss
C) Allows users to understand how the fair value of equity instruments has been determined
D) Allows users to understand the nature and extend of share-based arrangements

Question 15

What are employee profit-sharing and bonus plans commonly based on?

A) Equity
B) Cash
C) Employee longevity
D) All of the above answers are correct

Question 16

The superannuation trust fund is a separate entity which manages the fund's assets and is responsible for the fund's obligations.The employer's only assets and liabilities are related to the accrual or deferral of the payments due to the superannuation plan.Discuss whether you agree or disagree with the above approach to accounting for superannuation costs by employers.

Question 17

Sick leave entitlements should be reflected as a liability in accordance with AASB 119 when:

A) it is non-accumulating sick leave
B) it is accumulating sick leave which is vesting
C) it is accumulating sick leave which is non-vesting
D) never

Question 18

Gassy Pty Ltd pays Andy $80 000 per annum in cash,plus a car that cost $50 000 a year.The company income tax rate is 30% and the average personal income tax rate is 45%.There are no other taxes (ignore Fringe Benefits Tax for the purposes of this calculation).Personal income tax is not paid on non-cash benefits.The after-tax cost of employing Andy for the year and the after-tax benefits received by Andy are,respectively:

A) $80 000; $71 500
B) $28 000; $71 500
C) $80 000; $94 000
D) None of the above

Question 19

Wendell is employed at a salary of $150 000 per annum,paid in cash,the company income tax rate is 30%,and the average personal income tax rate is 42%.There are no other taxes.The after-tax cost of employing Wendell for the year and the after-tax benefit received by Andy are,respectively:

A) $105 000; $63 000
B) $105 000; $87 000
C) $87 000; $63 000
D) None of the above

Question 20

In Australia,the attractiveness of salary packaging is being reduced by which of the following factors?

A) Fringe benefits tax which taxes the employer on non-cash benefits paid to the employee
B) The decreasing difference between personal tax rates and the company tax rate
C) Non-cash salary being taxable in the hands of the employee
D) All of the above

Question 21

Which of the following is not a true statement concerning the accounting for superannuation costs by employers under a defined benefits plan?

A) The intention of the employer is to ensure that the plan can meet its agreed benefits as they fall due
B) When an employee is paid under the superannuation plan, the payment is treated as an expense
C) The performance of the plan has a direct effect on the statement of financial position of the employer
D) All are true statements

Question 22

Discuss the three types of share-based payment transactions as outlined by AASB 2 'Share-based Payment'.

Question 23

There are two types of risk associated with post-employment benefits,investment risk and actuarial risk.Explain these terms and describe the situations when these risks are borne by the employee and when they are borne by the employer (in accordance with AASB 119).

Question 24

What are the two approaches to accounting for post-employment benefit costs by employers?

A) the current and deferred methods
B) the deferred debit and the deferred credit methods
C) the defined benefit method and the defined contribution methods
D) the form method and the net-worth methods

Question 25

The method of accounting for superannuation costs based on the assumption that the trust that manages the superannuation plan is a separate legal entity to the employer and is responsible for the fund's obligations is:

A) the form method
B) the legal entity method
C) the net-worth method
D) none of the above

Question 26

Which of the following methods for the recognition of actuarial gains and losses are acceptable under AASB 119?
I.Immediate recognition of all actuarial gains or losses through profit or loss
ii) Recognition of all actuarialgains or losses outside profitor loss
iii) The corridorapproach

A) i
B) i and ii
C) ii and iii
D) i, ii and iii

Question 27

In terms of post-employment benefits,at what point does past-service costs arise?

A) an employee is terminated and the employer must provide compensation for the past service of the employee
B) a defined benefits post-employment plan is established or when the plan's benefits are increased
C) a defined contributions post-employment plan is established or when the plan's benefits are increased
D) a new employee commences employment

Question 28

Which of the following is not considered a post-employment benefit by AASB 119?

A) Superannuation
B) Termination benefits
C) Administrative support
D) Free travel

Question 29

Leopard Ltd has a defined benefit superannuation plan where the present value of the accrued benefits on 1 January 20X6 was $850 000 and on 31 December 20X6 was $910 000.During 20X6 Leopard Ltd paid $80 000 to the plan.On 1 January 20X6 the net market value of the plans assets was $365 000 and on 31 December 20X6 was $468 000.Under the net-worth method the superannuation expense for the year ended 31 December 20X6 to be shown in Leopard's accounts is:

A) $80 000
B) $60 000
C) $37 000
D) $53 000