Saurabh Engineering Ltd. provides the retirement benefit facility to its employees and prepares its financial statements every year on 31 st March…

CA Final · Financial Reporting · PYQS · May 2026
Saurabh Engineering Ltd. provides the retirement benefit facility to its employees and prepares its financial statements every year on 31 st March based on Ind AS. Following information is available in respect of its employees benefit facility: (in lakhs) 31.3.2024 31.3.2025 31.3.2026 Current service cost 250 280 310 Benefits paid 260 300 340 Contributions paid 160 180 200 Present value of the obligation at 31 st March 2,430 2,826 3,200 Fair value of plan assets at 31 st March 2,294 2,274 2,400 11% 10% 9% Discount rate at the start of the year 11% 10% 9% Expected return on plan assets 13% 12% 11% The present value of the obligation and the fair value of the plan assets were both - 2,000 lakhs at 1 st April, 2023 and there were no actuarial gains or losses at this date. The average remaining lives of the employees was estimated to be 15 years. In respect of each of the three years, you are required to: (i) Calculate the actuarial gain/loss arising in each of the period. (ii) Calculate how the gain or loss should be recognised and in which period. (iii) Calculate the liability to be included in Balance Sheet at each year end. (iv) Explain the composition of amount recognised in profit and loss.

Suggested Answer and Working Notes:

(i) Calculation of Actuarial Gain / (Loss) A. Actuarial Gain / (Loss) on Defined Benefit Obligation (₹ in lakhs) Particulars 2023-2024 2024-2025 2025-2026 Opening obligation 2,000 2,430 2,826 Add: Interest cost 220 243 254.34 Add: Current service cost 250 280 310 Less: Benefits paid (260) (300) (340) Expected closing obligation 2,210 2,653 3,050.34 Actual closing obligation (2,430) (2,826) (3,200) Actuarial (loss) (220) (173) (149.66) B. Actuarial Gain / (Loss) on Plan Assets (₹ in lakhs) Particulars 2023-2024 2024-2025 2025-2026 Opening plan assets 2,000.00 2,294.00 2,274.00 Add: Expected return 260.00 275.28 250.14 Add: Contributions 160.00 180.00 200.00 Less: Benefits paid (260.00) (300.00) (340.00) Expected closing assets 2,160.00 2,449.28 2,384.14 Actual closing assets 2,294.00 (2,274.00) 2,400.00 Actuarial gain/(loss) 134.00 (175.28) 15.86 C. Net Actuarial Gain / (Loss) Year Actuarial Gain / (Loss) on Defined Benefit Obligation Actuarial Gain / (Loss) on Plan Assets Amount (₹ in lakhs) 2023-2024 (220) 134.00 (86) Loss 2024-2025 (173) (175.28) (348.28) Loss 2025-2026 (149.66) 15.86 (133.80) Loss (ii) Treatment of Actuarial Gain / Loss As per Ind AS 19 'Employee Benefits', actuarial gain/loss (remeasurements) shall be recognised immediately in Other Comprehensive Income (OCI). (iii) Amount of Liability to be recognised in Balance Sheet (₹ in lakhs) Particulars 31.3.2024 31.3.2025 31.3.2026 Present value of obligation 2,430 2,826 3,200 Less: Fair value of plan assets (2,294) (2,274) (2,400) Net defined benefit liability 136 552 800 (iv) Amount recognised in Statement of Profit and Loss 1. Current Service Cost represents the increase in present value of the defined benefit obligation resulting from employee service in the current period. It is charged to Profit and Loss in the year in which the service is rendered. 2. Net Interest Cost on Net Defined Benefit Liability / Asset- This is the net financing cost which is calculated as difference of interest cost on defined benefit obligation and interest income on plan assets, computed using the discount rate at the beginning of the period. Extract of Statement of Profit and loss and OCI (₹ in lakhs) Particulars 2023-2024 2024-2025 2025-2026 Current service cost 250 280 310 Interest cost on obligation 220 243 254.34 Less: Interest income on plan assets (260) (275.28) (250.14) Net amount recognised in P&L 210 247.72 314.20 Other Comprehensive Income Net Actuarial Gain / (Loss) (86) (348.28) (133.80)

Topics: Ind AS 19, Ind AS 1

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