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plans are defined contribution plans. Defined benefit plans guarantee certain defined benefits, often determined by a formula that takes into consideration factors such
as number of years of service of employees and their salary level at the time of retirement, irrespective of whether the plan has sufficient assets; thus the ultimate
responsibility for payment (which may be guaranteed by an insurance company, the government, or some other entity, depending on local law and custom) remains
with the employer. In rare cases, a retirement benefit plan may contain characteristics of both defined contribution and defined benefit plans; for the purposes of this
Standard, such a hybrid plan is deemed to be a defined benefit plan.
According to IAS 26, the report of a defined contribution plan should contain a “Statement of the Net Assets Available for Benefits” and a description of the
funding policy. In preparing the statement of the net assets available for benefits, the plan investments should be carried at “fair value,” which in the case of marketable
securities would be their “market value.” If an estimate of fair value is not possible, the entity must disclose why “fair value” has not been used.
PRACTICAL INSIGHT
In practice, in many cases, “plan assets” will have determinable market values, because in discharge of their fiduciary responsibilities, plan trustees
generally will mandate that the retirement plans hold only marketable investments.
Example
An example of a statement of net assets available for plan benefits, for a defined contribution plan, is presented next.
Benevolent Corp. Defined Contribution Plan
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
Assets
Investments at fair value:
December 31, 2009
(in thousands of US $)
US government securities $10,000
US municipal bonds 13,000
US equity securities 13,000
EU equity securities 13,000
US debt securities 12,000
EU corporate bonds 12,000
Others 11,000
Total investments 84,000
Receivables:
Amounts due from stockbrokers on sale of securities 25,000
Accrued interest 15,000
Dividends receivable 12,000
Total receivables 52,000
Cash: 15,000
Total assets 151,000
Liabilities
Accounts payable
Amounts due to stockbrokers on purchase of securities 20,000
Benefits payable to participants—due and unpaid 21,000