In the Balance Sheet of the enterprise, ‘the amount recognized as a defined benefit liability should be the net total of the following amounts:
- the present value of the defined benefit obligation at the balance sheet date;
- minus any past service cost not yet recognized;
- minus the fair value at the balance sheet date of plan assets (if any) out of which the obligations are to be settled directly.’
In case where fair value of plan assets is high, it may so happen that the net amount under defined benefit liability turns negative (giving rise to net assets). A S 15 states that the enterprise, in such a situation, should measure the resulting asset at the lower of:-
- the amount so determined; and
- the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
The Standard identifies seven components of defined employee benefit costs:
- current service cost;
- interest cost;
- the expected return on any plan assets (and any reimbursement rights);
- actuarial gains and losses (to the extent they are recognized);
- past service cost (to the extent they are recognized);
- the effect of any curtailments or settlements; and
- the extent to which the negative net amount of defined benefit liability exceeds the amount.