Test Bank 9th | Employee Benefits

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Chapter 12 Testbank

1. Long-service leave that is payable beyond 12 months after the end of the reporting period is to be measured at its present value.

True   False

2. Paragraph 17 of AASB 116 Property, Plant and Equipment stipulates that the costs of employee benefits directly attributable to the construction or acquisition of an item of property, plant and equipment are to be included within the cost of the asset.

True   False

3. Non-vesting sick-leave entitlements will be paid only upon a valid claim for sick leave by the employee.

True   False

4. Possible components of employee benefits include:

A. wages and salaries, sick leave, payroll tax and annual leave

B. superannuation, wages and salaries, sick leave and annual leave

C. sick leave, annual leave, unemployment benefits, salaries and wages

D. annual leave, wages and salaries, post-employment benefits and payroll tax

5. A defined contribution superannuation plan is one in which:

A. the contributions to the plan are only paid out to members on retirement

B. the benefits paid out by the plan are based on the average salary of an employee over a period of years as a reflection of the employee's contribution to the employer

C. the contributions are defined by the amount needed to pay out benefits to the members at a specified level on retirement

D. the benefits paid out by the plan depend on the contributions made to the plan and the earnings of that plan

6. The amount represented as a current liability, 'Provision for long-service leave' generally represents:

A. the amount to be expensed as long-service leave expense in the next 12 months

B. the amount of long-service that has been provided for, for all employees of the entity

C. the amount of long-service leave remaining to be taken by staff

D. the amount of long-service leave that is expected to be taken in the 12 months following the balance date

7. Which of the following is not a step in accounting for contributions to a defined benefit superannuation plan?

A. determine the fair value of any plan

B. discount any benefit employees have earned

C. estimate the amount of benefits employees have earned in return for their service in the current and prior periods

D. establish the numbers of years until retirement for each employee to accurately calculate their likely benefit

8. A defined contribution scheme:

A. moves any actuarial and investment risk from the employer to the employee

B. requires the contribution made by an employer to be recognised as an expense

C. will only create a liability for the employer to the extent that any agreed contribution remains unpaid at the end of the financial year

D. All of the given answers are correct.

9. Sick leave may be classified as:

A. cumulative vesting

B. cumulative non-vesting

C. non-cumulative vesting

D. All of the given answers are correct.

10. According to the former Australian guidance section of AASB 119, what are the categories of long-service leave entitlements and how should they be accounted for?

A. Categories—vesting and non-vesting; accounting treatment: vesting entitlements should be treated as a liability and expense of the period in which they are accumulated, while non-vesting entitlements should not be recognised until they vest.

B. Categories—unconditional, conditional and pre-conditional; accounting treatment: unconditional entitlements should be recognised as an expense and a liability as there is a commitment to a future cash outflow, whereas conditional and pre-conditional entitlements do not meet the AASB framework requirements for recognition.

C. Categories—defined benefit and defined contribution; accounting treatment: defined benefit entitlements should be treated as a liability and expense of the period in which they are accumulated, while defined contribution entitlements should not be recognised until they are actually taken by the employee.

D. Categories—pre-conditional, conditional and unconditional; accounting treatment: to the extent that entitlements accumulated in a period in any of the three categories are expected to result in future cash outflows for the reporting entity, they should be treated as expenses.

11. Because of the uncertainties involved in making future predictions, AASB 119 requires:

A. that the long-service leave estimate be based on the level of salary paid to employees at the time the entitlement was earned

B. that there is no consideration given to future inflation rates or promotion prospects of employees

C. that the discount rate used be based on the rates offered by high quality corporate bonds

D. that market-determined expected cash flows are discounted at the risk-adjusted discount rate

12. Dennis Carter works for Midrift Ltd and has taken his long-service leave this period. He was paid $2450 as his entitlement. What account(s) is/are debited in the entry to record this event?

A. provision for long-service leave and PAYG tax deduction

B. provision for long-service leave

C. long-service leave expense

D. long-service leave expense and PAYG tax deduction

13. AASB 119 has resulted in many more companies recognising liabilities for employee entitlements. There is evidence that this requirement has the effect of:

A. creating cash reserves from which employee entitlements can be paid in the case of company insolvency

B. increasing the probability of companies becoming insolvent

C. reducing the level of employment in Australia

D. None of the given answers are correct.

14. AASB 119 defines 'employee benefits' as:

A. salaries and wages, and associated on-costs

B. all cash payments made to employees

C. all cash payments made to employees in their roles as employees

D. all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment

15. A non-contributory superannuation fund means:

A. no contributions are made to the fund by either the employer or employee

B. only the employer makes contributions to the fund

C. only the employee makes contributions to the fund

D. both employee and employer make periodic contributions to the fund

16. Post-employment benefits include:

A. employee's medical costs

B. pensions payable through a superannuation fund

C. insurance costs

D. All of the given answers are correct.

17. The causes of actuarial gains and losses when accounting for defined benefit superannuation plans includes:

A. the expected high or low rates of employee turnover

B. the effect of changes of future employee turnover

C. the effect of changes to strategic direction for the entity

D. the effect of differences between the actual return on plan assets and the actual payments on plan liabilities

18. The general principle is that obligations for employee benefits that are due for payment beyond 12 months shall be discounted to their present value, with the discount rate to be based upon the yields being generated by _____________________.

A. high-quality corporate bonds

B. government bonds

C. superannuation fund

D. None of the given answers are correct.

19. Short-term employee benefits include wages, salaries and social security contributions. They also include annual leave and __________ to the extent they are paid within 12 months of the period in which the employee renders the employer services.

A. sick leave

B. long-service leave

C. superannuation

D. bonuses

20. When an employee has rendered service to an entity during an accounting period, the entity shall recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as a(n) _________, unless another Accounting Standard requires or permits the inclusion of the benefits in the cost of an asset (AASB 119).

A. income

B. expense

C. asset

D. superannuation

21. An example of 'high-quality corporate bonds' would be the bonds (also called 'debentures') issued by leading 'blue chip' companies, and which have been assessed to have a very good credit rating; for example, at or above a(n) _________ rating by a ratings agency such as Standard & Poor's.

A. AA or AAA

B. BB or BBB

C. CC or CCC

D. DD or DDD

22. Entitlement to benefits such as long-service leave is measured on the basis of ___________________.

A. present values

B. fair values

C. nominal values

D. historical values

23. In relation to obligations for salaries and wages, liabilities for salaries and wages (and annual leave) entitlements will arise only where the services have been rendered by the employee but the associated entitlements ___________ as at the end of the reporting period.

A. have not been paid

B. have been paid in full

C. have been paid partially

D. have been paid in cash

24. As paragraph 17 of AASB 116 Property, Plant and Equipment stipulates, the costs of employee benefits directly attributable to the construction or acquisition of an item of property, plant and equipment are to be included within the cost of the ___________.

A. asset

B. liability

C. bonds

D. debentures

25. The additional costs of employing someone, such as payroll tax and workers' compensation insurance, which are not received directly by the employee, are usually called _________________.

A. salaries and wages

B. superannuation benefits

C. on-costs

D. off-costs

26. The employer-incurred costs, such as payroll tax, workers' compensation insurance and superannuation contribution, are examples of _______________________.

A. high costs

B. low costs

C. on-costs

D. off-costs

27. Protecting the rights of employees in insolvent companies has long been high on the legislative agenda. Australian law has approached the problem by granting priorities in times of insolvency. Under the law, employees do have _________________________ when a company experiences difficulties.

A. access to all cash flows of the company

B. some preferential access to payment

C. access to the selling of plant

D. access to the selling of its machinery

28. What are the two types of sick-leave entitlements?

______________________________________________________________________________

29. Briefly discuss vesting sick leave.

______________________________________________________________________________

30. Briefly discuss non-vesting sick leave.

______________________________________________________________________________

31. Differentiate vesting sick leave and non-vesting sick leave.

______________________________________________________________________________

32. Even though an organisation has created various provisions and reserves, why might it be short of cash?

______________________________________________________________________________

33. Explain briefly the Australian law for protecting the rights of employees in terms of insolvent companies.

______________________________________________________________________________

34. Explain briefly the significance of assets in meeting claims in terms of corporate collapses.

______________________________________________________________________________

35. Discuss briefly typical Australian annual leave entitlements.

______________________________________________________________________________

36. What is meant by 'on-costs'?

______________________________________________________________________________

37. What are the 'on-costs' that explicitly need to be considered when calculating an employer's obligations regarding employee benefits?

______________________________________________________________________________

38. Where are the costs of employee benefits directly attributable to the construction or acquisition of an item of property, plant and equipment to be included, according to paragraph 17 of AASB 116 Property, Plant and Equipment?

______________________________________________________________________________

Chapter 12 Testbank