EMPLOYEE BENEFIT PLAN

6 Months Ended

Jun. 30, 2023

Retirement Benefits [Abstract]

EMPLOYEE BENEFIT PLAN

13. EMPLOYEE BENEFIT PLAN

The Company’s subsidiary, Top Draw Animation, Inc., has an unfunded, non-contributory defined benefit plan covering its permanent employees.

Under the existing regulatory framework, the Company is required to pay eligible employees at least the minimum regulatory benefit upon retirement, which provides a retirement benefit equal to 22.5 days’ pay for every year of credited service, subject to age and service requirements. The regulatory benefit is paid in a lump sum upon retirement. The existing regulatory framework does not require minimum funding of the plan.

Retirement benefit expenses and liabilities are determined in accordance with an actuarial study made for the plan utilizing the net interest approach which disaggregates the defined benefit cost into the following components: service costs (cost of services received); net interest (financing effect of paying for benefits in advance or in arrears); and remeasurements (period-to-period fluctuations in the amounts of defined benefit obligations and plan assets).

Under the net interest approach, service cost and net interest on the defined benefit liability (asset) are both recognized in the statement of operations, while remeasurements of the defined benefit liability (asset) are recognized in other comprehensive income. Remeasurements recognized in other comprehensive income shall not be reclassified to profit or loss in a subsequent period.

The amount of the defined benefit liability reported under other noncurrent liabilities in the Company’s Consolidated Balance Sheet is determined as follows:

	June 30, 2023		December 31, 2022
Benefit obligation	$	233,433	$	434,974
Plan assets		–		–
Total	$	233,433	$	434,974

The components of the accumulated benefit cost to be recognized under selling, general and administrative expense in consolidated statement of operations are the service cost (current service cost, past service cost or credit and settlement gains or losses) and net interest expense on the net defined benefit liability:

	June 30, 2023		June 30, 2022
Current service cost	$	9,164	$	2,471
Net interest expense		8,857		–
Total	$	18,021	$	2,471

The change in the accumulated benefit cost in the Company’s Condensed Consolidated Balance Sheet for the six months ended June 30, 2023 is as follows:

	2023
Balance, January 1	$	434,974
Foreign currency translation		2,398
Expense recognized in other comprehensive income		18,021
Remeasurement on actuarial gain (loss) recognized		(44,351	)
Contributions paid		(177,609	)
Balance, June 30	$	233,433

The cumulative amount of actuarial gains recognized in other comprehensive income for the six months ended June 30, 2023 and 2022 is as follows:

	2023			2022
Balance, January 1	$	(36,682	)	$	60,518
Foreign currency translation		–			–
Actuarial gain (loss)		(42,733	)		–
Balance, June 30		79,405			60,518
Tax effect		19,851			(12,439	)
Cumulative actuarial gain (loss), net of tax	$	(59,544	)	$	48,079

The assumptions used to determine retirement benefits for the six months ended June 30, 2023 are as follows:

	June 30, 2023
Discount rate		6.22%
Salary increase rate		2.00%