IFRS for SMEs) IFRS for SMEs Employee Benefits and Share-Based Payment 1 — Questions and Answers
Question 1: Under IFRS for SMEs, short-term employee benefits that are expected to be settled within 12 months after the reporting period are measured at:
- Undiscounted amounts (Correct answer)
- Present value of expected future payments
- Fair value at reporting date
- Replacement cost
Correct answer: Undiscounted amounts
Short-term employee benefits are measured at the undiscounted amount expected to be paid because they are settled within 12 months and discounting would not be material.
Question 2: Under IFRS for SMEs, a defined contribution plan is one where:
- The entity pays fixed contributions and has no further obligation (Correct answer)
- The entity guarantees a specific retirement benefit
- Benefits are determined by a formula based on years of service
- Contributions vary with company profits
Correct answer: The entity pays fixed contributions and has no further obligation
In a defined contribution plan, the entity's legal or constructive obligation is limited to the amount it agrees to contribute, with no guarantee of future benefits.
Question 3: How does IFRS for SMEs require an entity to measure the liability for a defined benefit plan?
- Using the projected unit credit method or a simplified method (Correct answer)
- At the amount of contributions paid in the year
- At the fair value of plan assets only
- At the undiscounted total of promised future benefits
Correct answer: Using the projected unit credit method or a simplified method
IFRS for SMEs allows entities to use the projected unit credit method or a simplified method to measure defined benefit obligations.
Question 4: Under IFRS for SMEs, the cost of a defined contribution pension plan for the period is:
- The contribution payable for the period (Correct answer)
- The change in the present value of the defined benefit obligation
- The actuarial gain or loss for the year
- The expected return on plan assets
Correct answer: The contribution payable for the period
For defined contribution plans, the cost recognized is simply the contribution payable to the fund for the reporting period.
Question 5: Under IFRS for SMEs, short-term paid absences such as vacation leave are recognized:
- As a liability and expense when employees render service that increases their entitlement (Correct answer)
- Only when the leave is actually taken
- As a contingent liability
- Only if the absence is contractually required
Correct answer: As a liability and expense when employees render service that increases their entitlement
Accumulating short-term paid absences are recognized as the employees provide the service that creates the entitlement, not when the leave is taken.
Question 6: Which of the following is an example of a long-term employee benefit under IFRS for SMEs?
- Long-term disability benefits payable more than 12 months after the reporting period (Correct answer)
- Annual bonuses settled within 12 months
- Health insurance premiums paid monthly
- Weekly wages
Correct answer: Long-term disability benefits payable more than 12 months after the reporting period
Long-term employee benefits are those not expected to be settled within 12 months after the reporting period, such as long-term disability benefits.
IFRS for SMEs) IFRS for SMEs Employee Benefits and Share-Based Payment 1
Under IFRS for SMEs, short-term employee benefits that are expected to be settled within 12 months after the reporting period are measured at: