Financial Statement Note for Adelaide Ltd: AASB 119 Employee Benefits

This assignment requires the preparation of a formal email to Ms. Zhao, Adelaide Ltd's Company Secretary, to assist in preparing the company's financial statements for the year ended 30 June 2016, specifically regarding the disclosure of the Adelaide Group Superannuation Plan (AGSP) under AASB 119 Employee Benefits. The email must explain the "projected unit credit method" and calculate the net defined benefit liability (asset) as of 30 June 2016, the defined benefit cost to be recognized in both the Statement of Profit or Loss and the Statement of Other Comprehensive Income for the year ended 30 June 2016. The solution includes detailed workings, calculations, and explanations supported by references to relevant accounting pronouncements, presented as a Word document attachment to the email. The provided data includes information about plan assets, defined benefit obligations, discount rates, rates of return, benefits paid, contributions received, current service costs, and amendments to the AGSP. The assignment aims to demonstrate an understanding of the accounting standards and their application in a real-world scenario.

Background:
Assume that you are managers in the audit section of an accounting firm. One of the firm’s
clients, Adelaide Ltd, operates in the retail sector, with over 100,000 employees. Adelaide
Ltd sponsors a defined benefit superannuation plan, the Adelaide Group Superannuation Plan
(AGSP) which provides superannuation benefits for qualifying employees on retirement. You
have been asked to provide guidance to the client on how to write the note to the financial
statements that provides all of the relevant disclosures in accordance with AASB 119
Employee Benefits for the Plan.
Data: Adelaide Ltd contributes to the AGSP on behalf of its employees. Details of the AGSP
for the year ended 30 June 2016 are:
At 1 July 2015 the:
Fair value of the plan assets were $11,182,400
Present value of the defined benefit obligation was $11,501,700
Discount rate was 5%
At 30 June 2016 the:
Fair value of the plan assets were $11,012,800
Present value of the defined benefit obligation was $11,487,500
Discount rate was 7%
During the year ended 30 June 2016 the:
Rate of return on plan assets was 6%
Benefits paid were $1,900,800
Contributions received $1,604,000
Current service cost $1,344,000
Additional information:
 In July 2015 the AGSP was amended to increase superannuation benefits for
employees for each year of service, starting on 1 July 2011. The present value of the
additional superannuation benefits for service from 1 July 2011 to 1 July 2015 is
$818,000.
 Extract from the Notes to the Financial Statements from a model set of financial
statements.

“For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuations being carried out at the end of each annual
reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes
to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected
immediately in the statement of financial position with a charge or credit recognised in other
comprehensive income in the period in which they occur.” (GAAP Holdings (Australia Ltd) Notes to
the financial statements, Note 3)
Required:
You are required to write a formal email to Ms Zhao, Adelaide Ltd’s Company Secretary, to
assist her in the preparation of the company’s financial statements for the year ended 30 June
2016. In the email you should explain in your own words the meaning of several terms that
will be included in the note to the accounts for the disclosure of the company’s interest in the
AGSP and identify relevant amounts that must be recognised in the financial statements. The
email should include:
1. A clear explanation (using your own words) of the following terms that appear in the
extract from model financial statements that is included under the heading ‘Additional
information’:
(a) “projected unit credit method”,
2. The amounts that should be included in the financial statements of Adelaide Ltd for the
year
ended 30 June 2016 as follows:
(a) The amount of the net defined benefit liability (asset) that should be recognised as at
30 June 2016 in the statement of financial position.
(b) The amount of defined benefit cost that should be recognised for the year ended 30
June 2016 in their:
(i) Statement of Profit or Loss, and
(ii) Statement of Other Comprehensive Income.
*All workings must be clearly shown and included as an attachment to the email.
Explanations
must be supported with appropriate references to relevant accounting pronouncements
(including paragraph numbers) where relevant.
*Please type your email and attachments as word documents