Document ID: chunk:federal_register_of_legislation:F2023C00383:front:0:p16
Version: federal_register_of_legislation:F2023C00383
Segment Type: other
Provision Reference: 
Character Range: 40016–42851

and measurement
51 When an employee has rendered service to an entity during a period, the entity shall recognise the contribution payable to a defined contribution plan in exchange for that service:
(a) as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, an entity shall recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund.
(b) as an expense, unless another Australian Accounting Standard requires or permits the inclusion of the contribution in the cost of an asset (see, for example, AASB 102 and AASB 116).
52 When contributions to a defined contribution plan are not expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service, they shall be discounted using the discount rate specified in paragraph 83.

Disclosure
53 An entity shall disclose the amount recognised as an expense for defined contribution plans.
54 Where required by AASB 124 an entity discloses information about contributions to defined contribution plans for key management personnel.

Post-employment benefits: defined benefit plans
55 Accounting for defined benefit plans is complex because actuarial assumptions are required to measure the obligation and the expense and there is a possibility of actuarial gains and losses. Moreover, the obligations are measured on a discounted basis because they may be settled many years after the employees render the related service.

Recognition and measurement
56 Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting entity and from which the employee benefits are paid. The payment of funded benefits when they fall due depends not only on the financial position and the investment performance of the fund but also on an entity's ability, and willingness, to make good any shortfall in the fund's assets. Therefore, the entity is, in substance, underwriting the actuarial and investment risks associated with the plan. Consequently, the expense recognised for a defined benefit plan is not necessarily the amount of the contribution due for the period.
57 Accounting by an entity for defined benefit plans involves the following steps:
(a) determining the deficit or surplus. This involves:
(i) using an actuarial technique, the projected unit credit method, to make a reliable estimate of the ultimate cost to the entity of the benefit that employees have earned in return for their service in the current and prior periods