FINAL TERM SYNCHRONOUS TASK Multiple Choice Questions Identify the choice that best completes the statement or answers the question. ____ 1. These are all forms of consideration given by an entity in exchange for service rendered by employees. a. Employee benefits c. Fringe benefit b. Employee compensation d. Salaries and wages ____ 2. Short-term employee benefits include all of the following, except a. Wages, salaries and social security contributions. b. Short-term compensated absences. c. Profit-sharing and bonuses payable in more than twelve months after the end of the period in which the employees render the related service. d. Nonmonetary benefits for current employees, such as medical care, housing, car and free and subsidized goods. ____ 3. These are compensated absences that are carried forward and can be used in future periods and the employees are entitled to a cash payment for unused entitlement on leaving the entity. a. Accumulating and vesting c. Nonaccumulating and vesting b. Accumulating and nonvesting d. Nonaccumulating and nonvesting ____ 4. The entity retains the obligation for the payment of retirement benefits without the establishment of a separate fund. a. Contributory plan c. Funded plan b. Noncontributory plan d. Unfunded plan ____ 5. Under a defined contribution plan I. The entity’s legal or constructive obligation is limited to the amount it agrees to contribute to the fund. II. The entity’s obligation is to provide the agreed benefits to current and former employees. a. I only c. Both I and II b. II only d. Neither I nor II ____ 6. It is a benefit plan under which an entity pays a fixed contribution into a separate fund and will have no legal or constructive obligation to pay further contribution if the fund becomes insufficient to pay employee benefits. a. Postemployment benefit plan c. Defined benefit plan b. Defined contribution plan d. Multi-employer plan ____ 7. Which is incorrect concerning the recognition and measurement of a defined benefit plan? a. Actuarial assumptions are required to measure the obligation and expense and there is a possibility of actuarial gains and losses. b. The obligation is measured on a discounted basis. c. The defined benefit plan must be fully funded. d. The expense recognized for a defined benefit plan is not necessarily the amount of contribution due for the period. ____ 8. What is the mandated method of determining the present value of the defined benefit obligation? a. Projected unit credit method c. Individual level premium method b. Entry age normal method d. Aggregate method ____ 9. It is the increase in the present value of the defined benefit obligation resulting from employee service in the current period. a. Current service cost c. Past service cost b. Interest cost d. Unrecognized actuarial loss ____ 10. These are assets held by an entity, the fund itself, that is legally separate from the reporting entity and exists solely to pay or fund employee benefits. a. Plan assets c. Retirement fund b. Trust fund d. Pension assets ____ 11. Plan assets are assets held by a long-term benefit fund that satisfies all of the following conditions, except a. The fund is legally separate from the reporting entity. b. The assets of the fund are to be used only to settle the employee benefit obligation. c. The assets in the fund can be returned to the entity even if the remaining assets of the fund are not sufficient to meet the plan’s obligation. d. The assets are not available to the reporting entity’s creditors even in bankruptcy. ____ 12. It is an insurance policy issued by an insurer that is not a related party of the reporting entity and the proceeds of the policy can be used only to pay or fund employee benefits under a defined benefit plan. a. Qualifying insurance policy c. Annuity b. Aggregate policy d. Unconditional insurance policy ____ 13. Which is incorrect concerning return on plan assets? a. The actual return on plan assets is one component of the expense recognized in the income statement. b. The difference between the expected return and actual return on plan assets is an actuarial gain or loss. c. The expected return on plan assets is based on market expectations, at the beginning of the period, for returns over the entire life of the related obligation. d. In determining the expected and actual return on plan assets, an entity shall deduct expected administration costs not included in actuarial assumptions in measuring defined benefit obligation, and tax payable by the plan itself. ____ 14. The amount recognized as liability in the statements of financial position shall be the net total of the following amounts (choose the incorrect one) a. The present value of the projected benefit obligation at balance sheet date b. Plus any actuarial gains, less any actuarial losses, not yet recognized c. Plus any past service cost not yet recognized d. Minus the fair value of plan assets at balance sheet date ____ 15. It is the increase in present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction or amendment of a defined benefit plan. a. Current service cost c. Past service cost b. Interest cost d. Employee benefit cost ____ 16. Which is correct concerning amortization of past service cost? I. The past service cost shall be expensed immediately when additional benefits vest immediately. II. If the benefits are not vested, the past service cost is amortized on a straight line basis the period until the benefits become vested. a. I only c. Both I and II b. II only d. Neither I nor II over ____ 17. The vested benefits a. Are employee benefits that are not conditional on future employment. b. Are benefits to be paid to the retired employees in the current period. c. Are benefits to be paid to the retired employees in the subsequent year. d. Are benefits accumulated in the hands of a trustee. ____ 18. Which is incorrect concerning the basic accounting considerations for a defined benefit plan? a. The fair value of plan assets is the source of fund set aside in meeting future benefit payments. b. The projected benefit obligation is the present value of expected future payments required to settle the obligation arising from employee service in the current and prior periods. c. If the fair value of plan assets is more than the projected benefit obligation, the plan is overfunded and there is prepaid benefit cost. d. The fair value of plan assets is classified as noncurrent asset and the projected benefit obligation is classified as noncurrent liability in the statement of financial position. ____ 19. These are the entity’s best estimates of the variables that will determine the ultimate cost of providing postemployment benefits. a. Actuarial assumptions c. Financial assumptions b. Demographic assumptions d. Actuarial computations ____ 20. Which statement is correct concerning actuarial gains and losses? I. Actuarial gains and losses comprise of experience adjustments and the effects of changes in actuarial assumptions. II. Actuarial gains and losses may result from increases or decreases in either the present value of defined benefit obligation or the fair value of any related plan assets. a. I only c. Both I and II b. II only d. Neither I nor II ____ 21. What is the so called “corridor” in the recognition of actuarial gains and losses? a. 10% of the present value of the defined benefit obligation or 10% of the fair of plan assets at the beginning of the year, whichever is higher. b. 10% of the present value of the defined benefit obligation or 10% of the fair of the plan assets at the beginning of the year, whichever is lower. c. 10% of the present value of the defined benefit obligation or 10% of the fair of plan assets at the end of the year, whichever is higher. d. 10% of the present value of the defined benefit obligation or 10% of the fair of plan assets at the end of the year, whichever is lower. value value value value ____ 22. Which statement is incorrect concerning actuarial assumptions for a defined benefit plan? a. Actuarial assumptions shall be biased and mutually compatible b. Actuarial assumptions comprise of demographic and financial assumptions. c. The discount rate is equal to the market yield at the end of reporting period on high quality bonds, or if there are no such bonds, the market yield on government bonds. d. Postemployment benefit obligations shall be measured on a basis that reflects estimated future salarry increases. ____ 23. The gain or loss on curtailment or settlement shall be a. Recognized when the curtailment or settlement occurs. b. Recognized in other comprehensive income. c. Deferred and amortized over the average remaining service period of the covered employees. d. Treated as a change in accounting policy. ____ 24. Any transition loss on first adopting PAS 19 shall be recognized I. As expense immediately II. As expense over a maximum of 5 years a. I only c. Either I or II irrevocably b. II only d. Either I or II revocably ____ 25. Any transition gain on first adopting PAS 19 shall be a. Recognized in income immediately b. Deferred and amortized over a maximum of 5 years c. Credited to retained earnings d. Credited to equity ____ 26. An entity contributes to an industrial pension plan that provides a pension arrangement for its employees. A large number of other employers also contibute to the pension plan and the entity makes contribution in respect of each employee. These contributions are kept separate from corporate assets and are used together with any investment income to purchase annuities for retired employees. The only obligation of the entity is to pay the annual contribution. This pension scheme is a. Multiemployer plan and a defined contribution scheme b. Multiemployer plan and a defined benefit scheme c. Defined contribution plan only d. Defined benefit plan only ____ 27. An entity uses Philippine Financial Reporting Standards to prepare its financial statements but the defined benefit obligation has been calculated using assumptions that are different from PFRS. The financial statements of the entity also do not take into account unrecognized past service cost. How would the entity measure its net pension liability? a. The net present value of the defined benefit obligation less the fair value of the plan assets. b. The net present value of the defined benefit obligation less the fair value of plan assets less the unrecognized past service cost. c. The net present value of the defined benefit obligation less the fair value of the plan assets less the unrecognized past service cost and in addition, a review of the assumptions shall be undertaken to remeasure the obligation. d. The value in the entity’s statement of financial position will simply be used in the consolidated financial statements. ____ 28. An entity operates a defined benefit pension plan and changes it at the beginning of the current year to a defined contribution plan. The net pension liability after the plan amendment is less than the net pension liability before the plan amendment. How should the entity account for this change? a. The entity shall recognize a gain. b. The entity does not recognize a gain. c. The entity shall recognize a gain over the remaining service period of the employees. d. The entity shall recognize the gain but applies the 10% corridor approach. ____ 29. An entity operates a defined benefit plan that pays employees an annual benefit based on the number of years of service. The annual payment does allow the employer to vary the final benefit. Over the last five years, the entity has used his flexibility to increase employee’s pension by the current growth in earnings per share. How will employees’ benefit be calculated if they retire in the current period? a. It will be based on the existing plan rules plus the additional award. b. It will be based on the existing plan rules plus the current rate of growth in earnings per share. c. It will be based on the plan rules plus the current rate of inflation. d. It will be based on the plan rules plus the increase in earnings per share anticipated over the remaining service period of the employees. ____ 30. Which of these events will not cause a change in a defined benefit obligation? a. Changes in mortality rate or the proportion of employees taking early retirement. b. Changes in the estimated salaries or benefits that will occur in the future. c. Changes in the estimated employee turnover. d. Changes in the expected rate of return on plan assets. ____ 31. Which of the following terms best describes benefits which are payable as a result of an entity’s decision to end an employee’s employment before the normal retirement date? a. Postemployment benefits c. Termination benefits b. Defined contribution plans d. Defined benefit plans ____ 32. Which of the following statements best describes “other long-term employee benefits”? a. Benefits that are not due to be settled within twelve months at the end of the period in which the service is rendered. b. Benefits that are due to be settled within twelve months at the end of the period in which the service is rendered. c. Benefits payable as a result of an entity’s decision to end an employee’s employment before the normal retirement date. d. Benefits which are payable after completion of employment. ____ 33. Which of the following items should be included in plan assets? I. Assets held by a long-term employee benefit fund. II. Qualifying insurance policies. a. I only c. Both I and II b. II only d. Neither I nor II ____ 34. Under which category should lump sum benefit expressed as a certain percent of the final salary for each year of services and actuarial gains can be accounted for? a. Lump sum benefit should be accounted for under defined benefit plans. Actuarial gains should be accounted for under defined benefit plans. b. Lump sum benefit should be accounted for under short-term employee benefits. Actuarial gains should be accounted for under defined benefit plans. c. Lump sum benefit should be accounted for under defined benefit plans. Actuarial gains should be accounted for under defined contribution plans. d. Lump sum benefit should be accounted for under short-term employee benefits. Actuarial gains should be accounted for under defined contribution plans. ____ 35. The report of a defined contribution plan shall contain I. A statement of net assets available for benefits. II. A description of the funding policy. a. I only c. Both I and II b. II only d. Either I or II ____ 36. The report of a defined benefit plan shall contain I. A statement showing net assets available for benefits, the present value of promised benefits and the resuliting excess or deficit. II. A statement of net assets available for benefits including a note disclosing the present value of promised benefits. a. I only c. Both I and II b. II only d. Either I or II ____ 37. Retirement benefit plan investments shall be carried at a. Fair value c. Not realize value b. Historical cost less impairment d. Value in use ____ 38. In rare circumtances, when a retirement benefit plan has attributes of both defined contribution plan and defined benefit plan, it is deemed a. Defined benefit plan b. Defined contribution plan c. Neither defined benefit plan nor defined contribution plan d. Both defined benefit plan and defined contribution plan ____ 39. In the case of a defined benefit plan, PAS 26 a. Makes it incumbent upon the plan to obtain an annual actuarial valuation. b. Does not make it incumbent upon the plan to obtain an annual actuarial valuation c. Allows the plan to estimate the present value of future benefits based on valuation done by other similar plans. d. Allows the plan to add a percentage based on consumer price index to the previous year’s valuation of actuarial valuation. ____ 40. PAS 26 Accounting and reporting by retirement benefit plans shall be applied to which of the following? a. The costs to entities of employee retirement benefits b. Report to individuals on their future retirement benefits c. The financial statements relating to an actuarial business d. The general purpose financial reports of pension schemes ____ 41. Which of the following may be disclosed in the financial report of a defined benefit plan but would not be shown in the financial report of a defined contribution plan? a. Government bonds held b. Actuarial present value of promised retirement benefits c. Employee contributions d. Employer contributions ____ 42. An employer sponsoring a defined benefit pension plan must report a liability in the statement of financial position equal to a. The current year pension cost that was not funded. b. The difference between the fair value of plan assets and the accumulated benefit obligation. c. The difference between the accumulated benefit obligation and the projected benefit obligation. d. The difference between the fair value of plan assets and the projected benefit obligation. ____ 43. Which statement characterizes defined contribution plans? a. They are more complex in construction than defined benefit plans. b. The employer’s obligation is satisfied by making the appropriate amount of periodic contribution. c. The investment risk is borne by the employer. d. Contribution are made in equal amounts by employer and employees. ____ 44. Which of the following components should not be included in the calculation of net pension cost recognized for a period by an employer sponsoring a defined benefit plan? a. Expected return on plan assets b. Amortization of unrecognized past service cost c. Interest cost d. Contribution to the fund ____ 45. Unrecognized past service cost can be amortized based on which of the following methods? a. Straight line method using any systematic and rational approach b. Straight line method based on the average remaining service period of the qualified employees c. Interest method using the actuary’s discount rate d. Service method based on the average remaining service period of the qualified employees ____ 46. If the actual return onplan assets exceeds the expected return for the period the difference is a. A deferred loss b. A deferred gain c. Recognized as a loss in the current period d. Recognized as a gain in the current period ____ 47. The components of net periodic pension expense that involve delayed recognition are a. Interest cost, past service cost, transition cost and expected return on plan assets. b. Service cost, transition cost, and gains and losses. c. Gains and losses, transition cost and past service cost. d. Transition cost, past service cost and expected return on plan assets. ____ 48. Which of the following criteria is not required for the recognition of a liability for compensated absences? a. The amount of the obligation must be estimable. b. Payment of the obligation must be probable. c. Payment of the obligation will require the use of current assets. d. The compensation either vests with the employee or can be carried forward to subsequent years. ____ 49. An employer’s obligation for postretirement health benefits that are expected to be provided to an employee must be fully accrued by the date the a. Employee is fully eligible for benefits b. Employee retires c. Benefits are utilized d. Benefits are paid ____ 50. The projected benefit obligation is the measure of obligation that a. Can no longer be used under GAAP as an estimate for reporting the service cost component of pension expense. b. Is not an allowable estimate for reporting the service cost component of pension expense for defined benefit plan. c. Is one of several allowable estimates for reporting the service cost component of pension expense. d. Is the only allowable estimate for reporting the service cost component of pension expense.
