Deck 11: 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 fund bears the risk in a defined benefit plan, whereas the employee bears the risk in a defined contribution plan
C) the employer 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

C

Question 2

AASB 119 requires short-term employee benefits to be measured at:

A) future value
B) nominal value
C) present value
D) fair value

Answer 2

B

Question 3

Determining an entity's liability for long service leave requires estimation of:

A) when the leave will be taken
B) projected salary levels
C) proportion of employees who will become entitled to the leave
D) all of the above.

Answer 3

D

Question 4

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

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

Question 5

AASB 119 does NOT prescribe the accounting treatment for:

A) contributions to defined contribution post-employment benefit funds
B) contributions received by a defined contribution post-employment benefit fund
C) assets arising from defined benefit post-employment benefit plans from the perspective of the employer
D) liabilities arising from defined benefit post-employment benefit plans from the perspective of the employer

Question 6

Pirate 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 2013 the balance in the provision for annual leave account was $20 303.
Details of each employees leave entitlement at 30 June 2014 are as follows:
$\begin{array}{|l|l|l|l|}\hline \text { Employee } & \text { Salary } & \begin{array}{l}\text { Days owing @ } \\1 / 7 / 13\end{array} & \begin{array}{l}\text { Days taken } \\\text { during year }\end{array} \\\hline \text { Jo Bird } & \$ 65000 & 17 & 22 \\\hline \text { Bill Brown } & \$ 70000 & 5 & 12 \\\hline \text { Ben Fit } & \$ 85000 & 24 & 18 \\\hline \text { Greg Horn } & \$ 62500 & 3 & 15 \\\hline \text { Lou Hamilton } & \$ 90000 & 9 & 26 \\\hline\end{array}$
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.

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The closing balance in the provision for annual leave account at 30 June 2014 is:

A) $18 712
B) $19 647
C) $23 086
D) $27 221

Question 7

Which of the following types of employee benefits are required to be measured at their nominal value?

A) long service leave
B) defined benefit post-employment benefits
C) accumulating non-vesting sick leave
D) defined contribution employment benefits

Question 8

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) actions required to complete the plan indicate that significant changes to the plan are unlikely
B) the plan identifies the location, function or job classification, the number of employees whose services are to be terminated, and the expected completion date
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 9

AASB 119 adopts which method to determining long service leave obligations?

A) units of production method
B) the actuarial method
C) the bi-nominal method
D) projected unit credit method

Question 10

Pirate 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 2013 the balance in the provision for annual leave account was $20 303.
Details of each employees leave entitlement at 30 June 2014 are as follows:
$\begin{array}{|l|l|l|l|}\hline \text { Employee } & \text { Salary } & \begin{array}{l}\text { Days owing @ } \\1 / 7 / 13\end{array} & \begin{array}{l}\text { Days taken } \\\text { during year }\end{array} \\\hline \text { Jo Bird } & \$ 65000 & 17 & 22 \\\hline \text { Bill Brown } & \$ 70000 & 5 & 12 \\\hline \text { Ben Fit } & \$ 85000 & 24 & 18 \\\hline \text { Greg Horn } & \$ 62500 & 3 & 15 \\\hline \text { Lou Hamilton } & \$ 90000 & 9 & 26 \\\hline\end{array}$
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.

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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) $27 221
B) $28 654
C) $33 585
D) $33 668

Question 11

Actuarial gains or losses can arise from:
I $\quad$ employee service provided in the current period
II $\quad$ the unwinding of the discount applied to the obligation
III $\quad$ changes to actuarial assumptions
IV $\quad$ experience adjustments

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

Question 12

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 current service cost
B) the past service cost
C) the interest cost
D) an actuarial gain or loss

Question 13

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

A) once the employee becomes presently entitled to the leave
B) as the employee provides service to the entity
C) when the leave is taken by the employee
D) in a consistent manner from year to year

Question 14

AASB 119 defines employee benefits as:

A) any cash consideration given by an entity to employees or their authorised representatives in exchange for services rendered by the employee
B) all forms of consideration given by an entity to employees or their authorised representatives in exchange for services rendered by the employee
C) all forms of consideration given by an entity in exchange for service rendered by employees
D) all forms of consideration given by an entity to employees or their authorised representatives

Question 15

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

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

Question 16

Salary sacrificing refers to:

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

Question 17

Which of the following do NOT fall within the definition of a termination benefit?

A) employee resignation
B) voluntary redundancy accepted by an employee
C) termination of employment before the normal retirement date due to company insolvency
D) termination of employment before the normal retirement date due to poor performance

Question 18

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

A) accumulating and vesting
B) non-accumulating and vesting
C) non-accumulating and non-vesting
D) all of the above

Question 19

Benefits paid to members of a defined contribution post-employment fund are based on:
I $\quad$ the level of contributions made to the fund
II $\quad$ remuneration levels while employed
III $\quad$ number of year's service
IV $\quad$ investment returns generated by the fund

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

Question 20

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

A) wages and salaries
B) termination payments
C) bonuses and profit-sharing arrangements
D) short-term compensated benefits

Question 21

ABC 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.
On 31 December 2013 Joan Rivers left the company and was paid out her untaken leave entitlements. Joan had 12 days leave owing at 1 July 2013 and took 4 days leave between 1 July and 31 December 2013. Her salary at the time of her departure was
$140 000.
There are 260 work days in a year. On 1 July each year all employees receive a 3% wage rise. There are no other wage rises given during the year.
The gross entitlement owing to Joan Rivers on 31 December 2013 was:

A) $17 715
B) $9692
C) $5061
D) $11 388

Question 22

Which of the following types of employee benefits are required to be measured at the present value of expected future cash flows?

A) annual leave
B) accumulating non-vesting sick leave
C) maternity leave
D) long service leave

Question 23

The key steps involved in accounting by the employer for a defined benefit post-employment fund in accordance with AASB 119 include:

A) determining the deficit or surplus of the fund
B) determining the amount of the net defined benefit liability (asset)
C) determining the amounts to be recognised in profit or loss for current service cost, any past service cost and net interest expense (income) on the net defined benefit liability (asset)
D) all of the options are correct

Question 24

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

A) has a detailed formal plan
B) has a definite intention of terminating employment
C) has received Board approval for the termination benefits
D) can no longer withdraw the offer of the benefits

Question 25

Employee benefits can be allocated to assets:

A) only if it relates to the cost of an internally generated intangible
B) where the entity is certain the future economic benefits will flow to it
C) in accordance with the requirements of other accounting standards
D) where they meet the definition of an asset under the Conceptual Framework

Question 26

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

A) short-term compensated absences
B) termination benefits
C) other long-term employee benefits
D) post-employment benefits

Question 27

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

Question 28

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

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

Question 29

Carpenter Ltd has 6 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 2013 the accumulated untaken leave was 14 days in total. During the year ended 30 June 2014 a total of 50 days sick leave was taken, of which 12 days were unpaid leave.
Of the accumulated untaken leave at 30 June 2014 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 2014 is:

A) $1350
B) $3600
C) $2700
D) NIL, as the leave is non-vesting

Question 30

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) a liability for the unpaid contributions
C) an expense for the unpaid contributions
D) a gain for the unpaid contributions