Page 248 - SAMRC Annual Report 2023-24

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2024
SIGNIFICANT ACCOUNTING POLICIES

(CONTINUED)

1.15 Employee benefits (continued)
The return on plan assets is interest, dividends or similar distributions and other revenue derived from
the plan assets, together with realised and unrealised gains or losses on the plan assets, less any costs
of administering the plan (other than those included in the actuarial assumptions used to measure the
defined benefit obligation) and less any tax payable by the plan itself.

The entity account not only for its legal obligation under the formal terms of a defined benefit plan, but
also for any constructive obligation that arises from the entity’s informal practices. Informal practices give
rise to a constructive obligation where the entity has no realistic alternative but to pay employee benefits.
An example of a constructive obligation is where a change in the entity’s informal practices would cause
unacceptable damage to its relationship with employees.
The amount recognised as a defined benefit liability is the net total of the following amounts:
• the present value of the defined benefit obligation at the reporting date;
• minus the fair value at the reporting date of plan assets (if any) out of which the obligations are to be
settled directly;
• plus any liability that may arise as a result of a minimum funding requirement.

The amount determined as a defined benefit liability may be negative (an asset). The entity measures the
resulting asset at the lower of:
• the amount determined above; and
• the present value of any economic benefits available in the form of refunds from the plan or reductions
in future contributions to the plan. The present value of these economic benefits is determined using a
discount rate which reflects the time value of money.
Any adjustments arising from the limit above is recognised in surplus or deficit.

The entity determines the present value of defined benefit obligations and the fair value of any plan assets
with sufficient regularity such that the amounts recognised in the annual financial statements do not differ
materially from the amounts that would be determined at the reporting date.

The entity recognises the net total of the following amounts in surplus or deficit, except to the extent that
another Standard requires or permits their inclusion in the cost of an asset:
• current service cost;
• interest cost;
• the expected return on any plan assets and on any reimbursement rights;
• actuarial gains and losses;
• past service cost;
• the effect of any curtailments or settlements; and
• the effect of applying the limit on a defined benefit asset (negative defined benefit liability).
The entity uses the Projected Unit Credit Method to determine the present value of its defined benefit
obligations and the related current service cost and, where applicable, past service cost. The Projected
Unit Credit Method (sometimes known as the accrued benefit method pro-rated on service or as the
benefit/years of service method) sees each period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final obligation.

Actuarial valuations for GRAP 25 purposes are conducted on an annual basis by independent actuaries
separately for each plan. The results of the valuation are updated for any material transactions and other
material changes in circumstances (including changes in market prices and interest rates) up to the
reporting date.

246 SAMRC ANNUAL REPOR T 2023-24