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?

Question

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?

Quizplus · Accepted Answer

According to AASB 119, the employer is required to recognise a liability for the superannuation benefits that have been earned by employees up to the end of the reporting period. The liability should be based on the present value of the defined benefit obligation, which is the amount that is expected to be paid out in the future to the employees. In this case, the difference between the fair value of plan assets and the present value of the superannuation obligation as at 30 June 2012 is $13,390. Therefore, the company should recognise a superannuation obligation of $13,390 in its financial statements for the year ending 30 June 2012. Option A and B are incorrect because remitting the contribution to the fund and managing the assets and liabilities with the fund do not satisfy the requirement of recognising the liability in the financial statements. Option D is also incorrect because it suggests recognising the superannuation expense for the year based on the change in the present value of the obligation, but the question does not provide the beginning balance of the obligation. Option E is incorrect because there is a requirement to recognise the superannuation obligation in the financial statements.

Great Keppel Ltd Provides Defined Superannuation Benefits to Two (2)