QUESTION 1 (15 MARKS) NoMore (Pty) Ltd is a company that plans to offer termination benefits to its employees. Due to the Covid 19 pandemic, the entity has experienced extreme financial pressures. The entity intends to scale down dramatically. The Human Resource Manager, Ms Care Alot, is of the opinion that No More (Pty) Ltd should avoid retrenchments, as this could cause an uproar by the trade unions. Instead, she put forward that the entity should offer voluntary packages to employees. This approach will avoid creating animosity and demotivation among employees. As you are one of the most knowledgeable accountants at No More (Pty) Ltd, you were approached to assist with the financial planning as it relates to the termination benefits. NoMore (Pty) Ltd has three categories of employees: shift workers, managers and directors. Should any employee accept the termination benefit, they will be paid three times their annual gross salary. The following table represents projected figures relating to the years ended 30 June 2021 and 30 June 2022: For the year ended 30 June 2021 For the year ended 30 June 2022 Managers Directors Shift workers Managers Directors Shift workers 1 0 7 2 1 Number of 10 employees to accept termination benefits R220 000 R500 000 R750 000 Annual gross salary per employee 5% annual 5% annual salary salary escalation escalation 7,5% annual salary escalation The corporate tax rate for both years under review is 30%. MARKS REQUIRED FOR QUESTION 1: Suppose an after-tax discount rate of 11,2% applies. Calculate the total value for the provision for termination benefits as at 30 June 2021, in terms of IAS19: Employee benefits. 15 QUESTION 1 (15 MARKS) NoMore (Pty) Ltd is a company that plans to offer termination benefits to its employees. Due to the Covid 19 pandemic, the entity has experienced extreme financial pressures. The entity intends to scale down dramatically. The Human Resource Manager, Ms Care Alot, is of the opinion that No More (Pty) Ltd should avoid retrenchments, as this could cause an uproar by the trade unions. Instead, she put forward that the entity should offer voluntary packages to employees. This approach will avoid creating animosity and demotivation among employees. As you are one of the most knowledgeable accountants at No More (Pty) Ltd, you were approached to assist with the financial planning as it relates to the termination benefits. NoMore (Pty) Ltd has three categories of employees: shift workers, managers and directors. Should any employee accept the termination benefit, they will be paid three times their annual gross salary. The following table represents projected figures relating to the years ended 30 June 2021 and 30 June 2022: For the year ended 30 June 2021 For the year ended 30 June 2022 Managers Directors Shift workers Managers Directors Shift workers 1 0 7 2 1 Number of 10 employees to accept termination benefits R220 000 R500 000 R750 000 Annual gross salary per employee 5% annual 5% annual salary salary escalation escalation 7,5% annual salary escalation The corporate tax rate for both years under review is 30%. MARKS REQUIRED FOR QUESTION 1: Suppose an after-tax discount rate of 11,2% applies. Calculate the total value for the provision for termination benefits as at 30 June 2021, in terms of IAS19: Employee benefits. 15