Need an argumentative essay on Financial Reporting Bachelor. Needs to be 5 pages. Please no plagiarism.Download file to see previous pages... The defined contribution plans which includes multi-employ

Need an argumentative essay on Financial Reporting Bachelor. Needs to be 5 pages. Please no plagiarism.

The defined contribution plans which includes multi-employer plans, state plans, and other insurance schemes. Under these plans, since the liability of the employer is similar to the liabilities arising under defined contribution plans, the cost of the contribution plan should be accounted for in the income statement of the same period in which the contribution becomes payable by the employer in consideration for the services rendered by the employee during that period. (IAS 19.44)

"If contributions to a defined contribution plan do not fall due within 12 months after the end of the period in which the employee renders the service, they should be discounted to their present value". [IAS 19.45]

Any plan meant to provide post employment benefits to the employees other than defined contribution plan shall be construed as a defined benefit plan. Such plans include both formal and informal plans which create a constructive obligation to the employees of a firm with respect to the post employment benefits. ...

In order to account for the defined benefit plan the cost that would be recognized for the balance sheet purposes would be the present value of the defined benefit obligation. The present value in this case represents the present value of the anticipated future payments that may be needed to settle the obligations of the employees, post-employment benefits. The benefits might have accrued to the employees by reason of his/her service during the current or prior periods. "This value is to be adjusted for unrecognised actuarial gains and losses and unrecognised past service cost, and reduced by the fair value of plan assets at the balance sheet date". [IAS 19.54]

Accounting Treatment

The accounting treatment of defined contribution plan poses no problem as the employer/employee contributions to the fund have to be written off immediately to the income statement, as there if no further obligation for the employer to contribute to the fund in case there is any shortfall in the employer's provision.

However in the case of defined benefit plans two approaches are being followed:

Corridor approach and

Immediate write off to reserve approach

Corridor Approach

As such the standard IAS 19 does not insist on recognizing the actuarial gains and losses immediately unless the variations in them are abnormal to make the deferral inappropriate. This is based on the view that the actuarial gains and losses will tend to offset each other while they operate on a long term basis. Based on this principle IAS 19 has prescribed a corridor of 10 percent as the range of normal fluctuations in the gains and losses.