Defined benefit plans

In this lesson

1. 0:00 Introduction to defined benefit plans
2. 1:00 Measuring obligations with projected unit credit
3. 2:19 Current service cost and discount rates
4. 3:01 Interest cost and measurement gains or losses
5. 4:10 Plan assets and investment returns
6. 5:27 Past service cost, amendments and curtailments
7. 6:36 Worked example: scheme improvement amendment
8. 8:01 Curtailments and settlements explained
9. 9:38 Contributions, benefits paid and annual reconciliation
10. 12:25 Worked example: calculating remeasurement gains
11. 14:42 Asset ceiling and economic benefit limitation

About this lesson

You'll discover why these plans are more complex to account for, how to measure the obligation using the projected unit credit method, and what role actuaries play in estimating future liabilities. The lesson covers the key components you need to recognise in your financial statements: the current service cost (the increase in obligation from employees' service in the year), interest cost (the obligation growing closer to settlement), and measurement gains or losses (changes in actuarial assumptions). You'll learn how plan assets are measured at fair value and netted against the obligation on the statement of financial position, creating either a deficit (liability) or surplus (asset). The video walks through practical scenarios including plan amendments, curtailments (reducing pension benefits), and settlements (paying employees off completely). By the end, you'll understand how to account for contributions paid into the plan and benefits paid out to retirees, and how to present the complete picture in your financial statements. The lesson includes worked examples showing how to calculate net interest, service costs, and remeasurement gains or losses, plus the asset ceiling concept that limits how much surplus you can recognise. This content is essential for IFRS 19 Employee Benefits and relevant to ACCA Financial Reporting and CIMA Strategic Business Reporting papers.

Duration: 17m