Mastering Defined Benefit Plan Accounting

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Which one of the following is a requirement for recognizing a provision?

The provision must reflect future events that may affect the amount required to settle an obligation (correct)

The provision must reflect past events that have affected the amount required to settle an obligation

The provision must be based on subjective evidence

The provision must be based on current technology

What is the basis for determining the amount recognized in a provision?

The expectation of technically qualified, objective observers (correct)

The expectation of the entity's customers

The entity's subjective opinion

The entity's belief

What is an example of a cost reduction that can be included in a provision?

Expected cost reductions associated with future changes in technology

Expected cost reductions associated with the entity's subjective opinion

Expected cost reductions associated with increased experience in applying existing technology (correct)

Expected cost reductions associated with the entity's belief

Which actuarial technique is used to determine the deficit or surplus of a defined benefit plan?

Projected unit credit method Signup and view all the answers

What is the purpose of discounting the benefit in a defined benefit plan?

To determine the present value of the defined benefit obligation Signup and view all the answers

Which of the following is an example of a long-term employee benefit?

Sabbatical leave Signup and view all the answers

When should an entity recognize a liability and expense for termination benefits?

When the entity can no longer withdraw the offer of benefits Signup and view all the answers

Which type of post-employment benefit plan is determined by the amount of contributions paid by an entity to a post-employment benefit plan or to an insurance company?

Defined contribution plan Signup and view all the answers

When an employee has rendered service to an entity during a period, the entity shall recognize the contribution payable to a defined contribution plan in exchange for that service.

True Signup and view all the answers

Under which type of post-employment benefit plan does the entity's obligation include providing agreed benefits to current and former employees?

Defined benefit plan Signup and view all the answers

What type of risk falls on the entity under defined benefit plans?

Both actuarial and investment risks Signup and view all the answers

According to IAS 37, when should a provision be reversed?

When it is no longer probable that an outflow of resources will be required Signup and view all the answers

When should a provision be used?

For expenditures for which the provision was originally recognised Signup and view all the answers

When is a contract considered onerous?

When the unavoidable costs of meeting the obligations exceed the economic benefits expected Signup and view all the answers

What should be recognized before establishing a separate provision for an onerous contract?

Impairment loss on assets dedicated to that contract Signup and view all the answers

According to Italian GAAP, when should a provision be accrued?

All of the above Signup and view all the answers

What is the value of the provision according to Italian law?

The accounting value of the provision Signup and view all the answers

Why is there a difference in the accounting treatment of provisions between Italian GAAP and other legislations?

All of the above Signup and view all the answers

Which of the following is an example of a provision being recognized for the best estimate of the costs of clean-up?

An entity in the oil industry causing contamination and cleaning up when required by law Signup and view all the answers

When is a provision recognized for a present obligation as a result of a past obligating event?

When there is a present obligation based on evidence available Signup and view all the answers

In which situation is a provision not recognized and the matter disclosed as a contingent liability?

When there is no obligation as a result of past events Signup and view all the answers

What is the expected value of the cost of repairs for warranty obligations?

Euro 400,000 Signup and view all the answers

According to IAS 19, what are short-term employee benefits?

Employee benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period. Signup and view all the answers

According to OIC 31, how is the occurrence of a probable event defined?

The occurrence of an event is based on reliable and serious reasons, even if not certain. Signup and view all the answers

Which type of employee benefits are payable after the completion of employment?

Post-employment benefits Signup and view all the answers

What is the main difference between IAS 37 and OIC 31 regarding the actualization of the amount when a provision is relevant?

IAS 37 requires it, while OIC 31 does not require it. Signup and view all the answers