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Union of India - Section
Section 109 in The Companies (Accounting Standards) Rules, 2006
109. In determining the expected and actual return on plan assets, an enterprise deducts expected administration costs, other than those included in the actuarial assumptions used to measure the obligation.
| Example Illustrating Paragraph 108 | |
| At 1 January 20x1, the fair value of plan assets was Rs.10,000. On 30 June 20x1, the plan paid benefits of Rs. 1,900 andreceived contributions of Rs. 4,900. At 31 December 20x1, thefair value of plan assets was Rs. 15,000 and the present value ofthe defined benefit obligation was Rs. 14,792. Actuarial losseson the obligation for 20x 1 were Rs. 60. | |
| At 1st January 20x1, the reporting enterprise made thefollowing estimates, based on market prices at that date: | % |
| Interest and dividend income, after tax payable by the fund | 9.25 |
| Realised and unrealised gains on plan assets(after tax) | 2.00 |
| Administration costs | (1.00) |
| Expected rate of return | 10.25 |
| For 20x1, the expected and actual return on plan assets areas follows: | |
| (Amount in Rs.) | |
| Return on Rs. 10,000 held for 12 months at 10.25% | 1,025 |
| Return on Rs. 3,000 held for six months at 5%(equivalentto 10.25% annually, compounded every six months) | 150 |
| Expected return on plan assets for 20x1 | 1,175 |
| Fair value of plan assets at 31st December 20x1 | 15,000 |
| Less fair value of plan assets at 1st January 20x1 | (10,000) |
| Less contributions received | (4,900) |
| Add benefits paid | 1,900 |
| Actual return on plan assets | 2,000 |
| The difference between the expected return on plan assets(Rs. 1,175) and the actual return on plan assets (Rs. 2,000) isan actuarial gain of Rs. 825. Therefore, the net actuarial gainof Rs. 765 (Rs. 825 - Rs. 60 (actuarial loss on the obligation))would be recognised in the statement of profit and loss. |