IAS 19 Employee Benefits

This is a post of my own detailed and thorough explanation on the standards of the subject I'm taking, P2 Corporate Reporting (ACCA)

*You may skip this if it's irrelevant to you*

IAS 19 Employee Benefits

Types:

(1) Short-Term Benefits - due within 1 year, recognized as expenses in the same year.

- Compensated absences 

    - Accumulating (can be carried forward)

            - Vesting and Non-vesting 

    - Non-accumulating (cannot be carried forward)

- Bonus & Profit Sharing - recognized because it's a present obligation.

(2) Retirement Benefits 

- Defined Contribution Plan

- Defined Benefits Plan

Defined Contribution Plan

• Contribution is fixed
• Payout not guaranteed and depends on performance of plan
• Investment and Actuarial risk lies with employee

The contribution is to be treated as expenses and thus, no discounting is needed.

Defined Benefits Plan 

• Contribution is not fixed
• Payout guaranteed
• Investment and Actuarial risk lies with entity

Projected Unit Credit Method :

(1) Present Value of Obligation

(2) Fair Value of Plan Assets

(3) Net Liability (SOFP)

(4) Net Expense (P/L)

Remeasurement of Gain/Loss to OCI

If the (3) Net Liability is a Net Asset, then perform Asset Ceiling Test

LOWER of (amount recognized) :

- Net asset

- Present value of refund in contribution

The difference(balance) will go to Other Comprehensive Income (OCI).

Termination Benefits

It is recognized only when 

- committed to termination (present obligation), it will be expense immediately

- detailed & formal plan to terminate

- communicated plan

- voluntary redundancy

Ends,