TaxTMI 
TaxTMI 
Employee Benefits
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....benefits to which this Standard applies include those provided: (a) under formal plans or other formal agreements between an enterprise and individual employees, groups of employees or their representatives; (b) under legislative requirements, or through industry arrangements, whereby enterprises are required to contribute to state, industry or other multi-employer plans; or (c) by those informal practices that give rise to an obligation. Informal practices give rise to an obligation where the enterprise has no realistic alternative but to pay employee benefits. An example of such an obligation is where a change in the enterprise s informal practices would cause unacceptable damage to its relationship with employees. 4. Employee benefits include: (a) short-term employee benefits, such as wages, salaries and social security contributions (e.g., contribution to an insurance company by an employer to pay for medical care of its employees), paid annual leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees; (b) p....
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....ti-employer plans are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that: (a) pool the assets contributed by various enterprises that are not under common control; and (b) use those assets to provide benefits to employees of more than one enterprise, on the basis that contribution and benefit levels are determined without regard to the identity of the enterprise that employs the employees concerned. 7.8 Other long-term employee benefits are employee benefits (other than post-employment benefits and termination benefits) which do not fall due wholly within twelve months after the end of the period in which the employees render the related service. 7.9 Termination benefits are employee benefits payable as a result of either: (a) an enterprise s decision to terminate an employee s employment before the normal retirement date; or (b) an employee s decision to accept voluntary redundancy in exchange for those benefits (voluntary retirement). 7.10 Vested employee benefits are employee benefits that are not conditional on future employment. 7.11 The present value of a defined benefit obligation is the present value, witho....
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....nd unrealised gains or losses on the plan assets, less any costs of administering the plan and less any tax payable by the plan itself. 7.19 Actuarial gains and losses comprise: (a) experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and (b) the effects of changes in actuarial assumptions. 7.20 Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced). Short-term Employee Benefits 8. Short-term employee benefits include items such as: (a) wages, salaries and social security contributions; (b) short-term compensated absences (such as paid annual leave) where the absences are expected to occur within twelve months after the end of the period in which the employees render the related employee service; (c) profit-sharing and bonuses payable within twelve months afte....
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.... compensated absences may be either vesting (in other words, employees are entitled to a cash payment for unused entitlement on leaving the enterprise) or non-vesting (when employees are not entitled to a cash payment for unused entitlement on leaving). An obligation arises as employees render service that increases their entitlement to future compensated absences. The obligation exists, and is recognised, even if the compensated absences are non-vesting, although the possibility that employees may leave before they use an accumulated non-vesting entitlement affects the measurement of that obligation. 14. An enterprise should measure the expected cost of accumulating compensated absences as the additional amount that the enterprise expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date. 15. The method specified in the previous paragraph measures the obligation at the amount of the additional payments that are expected to arise solely from the fact that the benefit accumulates. In many cases, an enterprise may not need to make detailed computations to estimate that there is no material obligation for unused compensated absences. For exa....
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....ents. A present obligation exists when, and only when, the enterprise has no realistic alternative but to make the payments. 18. Under some profit-sharing plans, employees receive a share of the profit only if they remain with the enterprise for a specified period. Such plans create an obligation as employees render service that increases the amount to be paid if they remain in service until the end of the specified period. The measurement of such obligations reflects the possibility that some employees may leave without receiving profit-sharing payments. Example Illustrating Paragraph 18 A profit-sharing plan requires an enterprise to pay a specified proportion of its net profit for the year to employees who serve throughout the year. If no employees leave during the year, the total profit-sharing payments for the year will be 3% of net profit. The enterprise estimates that staff turnover will reduce the payments to 2.5% of net profit. The enterprise recognises a liability and an expense of 2.5% of net profit. 19. An enterprise may have no legal obligation to pay a bonus. Nevertheless, in some cases, an enterprise has a practice of paying bonuses. In such cases also, the ent....
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....yment benefits received by the employee is determined by the amount of contributions paid by an enterprise (and also by the employee) to a post-employment benefit plan or to an insurance company, together with investment returns arising from the contributions; and (b) in consequence, actuarial risk (that benefits will be less than expected) and investment risk (that assets invested will be insufficient to meet expected benefits) fall on the employee. 26. Examples of cases where an enterprise s obligation is not limited to the amount that it agrees to contribute to the fund are when the enterprise has an obligation through: (a) a plan benefit formula that is not linked solely to the amount of contributions; or (b) a guarantee, either indirectly through a plan or directly, of a specified return on contributions; or (c) informal practices that give rise to an obligation, for example, an obligation may arise where an enterprise has a history of increasing benefits for former employees to keep pace with inflation even where there is no legal obligation to do so. 27. Under defined benefit plans: (a) the enterprise s obligation is to provide the agreed benefits to current and ....
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....f the ultimate cost of benefits already earned at the balance sheet date is more than expected, the enterprise will have to either increase its contributions or persuade employees to accept a reduction in benefits. Therefore, such a plan is a defined benefit plan. 32. Where sufficient information is available about a multi-employer plan which is a defined benefit plan, an enterprise accounts for its proportionate share of the defined benefit obligation, plan assets and post-employment benefit cost associated with the plan in the same way as for any other defined benefit plan. However, in some cases, an enterprise may not be able to identify its share of the underlying financial position and performance of the plan with sufficient reliability for accounting purposes. This may occur if: (a) the enterprise does not have access to information about the plan that satisfies the requirements of this Standard; or (b) the plan exposes the participating enterprises to actuarial risks associated with the current and former employees of other enterprises, with the result that there is no consistent and reliable basis for allocating the obligation, plan assets and cost to individual enterp....
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.... other participating enterprise; or (b) any responsibility under the terms of a plan to finance any shortfall in the plan if other enterprises cease to participate. State Plans 37. An enterprise should account for a state plan in the same way as for a multi-employer plan (see paragraphs 29 and 30). 38. State plans are established by legislation to cover all enterprises (or all enterprises in a particular category, for example, a specific industry) and are operated by national or local government or by another body (for example, an autonomous agency created specifically for this purpose) which is not subject to control or influence by the reporting enterprise. Some plans established by an enterprise provide both compulsory benefits which substitute for benefits that would otherwise be covered under a state plan and additional voluntary benefits. Such plans are not state plans. 39. State plans are characterised as defined benefit or defined contribution in nature based on the enterprise s obligation under the plan. Many state plans are funded in a manner such that contributions are set at a level that is expected to be sufficient to pay the required benefits falling due in the ....
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....ligation to pay benefits to the employees and the insurer has sole responsibility for paying the benefits. The payment of fixed premiums under such contracts is, in substance, the settlement of the employee benefit obligation, rather than an investment to meet the obligation. Consequently, the enterprise no longer has an asset or a liability. Therefore, an enterprise treats such payments as contributions to a defined contribution plan. Post-employment Benefits: Defined Contribution Plans 44. Accounting for defined contribution plans is straightforward because the reporting enterprise s obligation for each period is determined by the amounts to be contributed for that period. Consequently, no actuarial assumptions are required to measure the obligation or the expense and there is no possibility of any actuarial gain or loss. Moreover, the obligations are measured on an undiscounted basis, except where they do not fall due wholly within twelve months after the end of the period in which the employees render the related service. Recognition and Measurement 45. When an employee has rendered service to an enterprise during a period, the enterprise should recognise the contribution p....
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....the investment performance of the fund but also on an enterprise s ability to make good any shortfall in the fund s assets. Therefore, the enterprise is, in substance, underwriting the actuarial and investment risks associated with the plan. Consequently, the expense recognised for a defined benefit plan is not necessarily the amount of the contribution due for the period. 51. Accounting by an enterprise for defined benefit plans involves the following steps: (a) using actuarial techniques to make a reliable estimate of the amount of benefit that employees have earned in return for their service in the current and prior periods. This requires an enterprise to determine how much benefit is attributable to the current and prior periods (see paragraphs 68-72) and to make estimates (actuarial assumptions) about demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in salaries and medical costs) that will influence the cost of the benefit (see paragraphs 73-91); (b) discounting that benefit using the Projected Unit Credit Method in order to determine the present value of the defined benefit obligation and the current serv....
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....ent value of defined benefit obligations and the fair value of any plan assets with sufficient regularity that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date. 58. The detailed actuarial valuation of the present value of defined benefit obligations may be made at intervals not exceeding three years. However, with a view that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date, the most recent valuation is reviewed at the balance sheet date and updated to reflect any material transactions and other material changes in circumstances (including changes in interest rates) between the date of valuation and the balance sheet date. The fair value of any plan assets is determined at each balance sheet date. 59. The amount determined under paragraph 55 may be negative (an asset). An enterprise should measure the resulting asset at the lower of: (a) the amount determined under paragraph 55; and (b) the present value of any economic benefits available in the form of refunds from the plan or reductions ....
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.... of assets such as tangible fixed assets (see AS 10 Accounting for Fixed Assets). Any post-employment benefit costs included in the cost of such assets include the appropriate proportion of the components listed in paragraph 61. Illustration 63. Illustration I attached to the Standard illustrates describing the components of the amounts recognised in the balance sheet and statement of profit and loss in respect of defined benefit plans. Recognition and Measurement: Present Value of Defined Benefit Obligations and Current Service Cost 64. The ultimate cost of a defined benefit plan may be influenced by many variables, such as final salaries, employee turnover and mortality, medical cost trends and, for a funded plan, the investment earnings on the plan assets. The ultimate cost of the plan is uncertain and this uncertainty is likely to persist over a long period of time. In order to measure the present value of the post-employment benefit obligations and the related current service cost, it is necessary to: (a) apply an actuarial valuation method (see paragraphs 65-67); (b) attribute benefit to periods of service (see paragraphs 68-72); and (c) make actuarial assumptions (....
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....to periods of service under the plan s benefit formula. However, if an employee s service in later years will lead to a materially higher level of benefit than in earlier years, an enterprise should attribute benefit on a straight-line basis from: (a) the date when service by the employee first leads to benefits under the plan (whether or not the benefits are conditional on further service); until (b) the date when further service by the employee will lead to no material amount of further benefits under the plan, other than from further salary increases. 69. The Projected Unit Credit Method requires an enterprise to attribute benefit to the current period (in order to determine current service cost) and the current and prior periods (in order to determine the present value of defined benefit obligations). An enterprise attributes benefit to periods in which the obligation to provide post-employment benefits arises. That obligation arises as employees render services in return for post-employment benefits which an enterprise expects to pay in future reporting periods. Actuarial techniques allow an enterprise to measure that obligation with sufficient reliability to justify rec....
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....yee renders service that will provide entitlement to the benefit if the specified event occurs. The probability that the specified event will occur affects the measurement of the obligation, but does not determine whether the obligation exists. Examples Illustrating Paragraph 70 1. A plan pays a benefit of ₹ 100 for each year of service. The benefits vest after ten years of service. A benefit of ₹ 100 is attributed to each year. In each of the first ten years, the current service cost and the present value of the obligation reflect the probability that the employee may not complete ten years of service. 2. A plan pays a benefit of ₹ 100 for each year of service, excluding service before the age of 25. The benefits vest immediately. No benefit is attributed to service before the age of 25 because service before that date does not lead to benefits (conditional or unconditional). A benefit of ₹ 100 is attributed to each subsequent year. 71. The obligation increases until the date when further service by the employee will lead to no material amount of further benefits. Therefore, all benefit is attributed to periods ending on or before that date. Benefit....
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....vice. 3. A post-employment medical plan reimburses 40% of an employee s postemployment medical costs if the employee leaves after more than ten and less than twenty years of service and 50% of those costs if the employee leaves after twenty or more years of service. Under the plan s benefit formula, the enterprise attributes 4% of the present value of the expected medical costs (40% divided by ten) to each of the first ten years and 1% (10% divided by ten) to each of the second ten years. The current service cost in each year reflects the probability that the employee may not complete the necessary period of service to earn part or all of the benefits. For employees expected to leave within ten years, no benefit is attributed. 4. A post-employment medical plan reimburses 10% of an employee s postemployment medical costs if the employee leaves after more than ten and less than twenty years of service and 50% of those costs if the employee leaves after twenty or more years of service. Service in later years will lead to a materially higher level of benefit than in earlier years. Therefore, for employees expected to leave after twenty or more years, the enterprise attributes benef....
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....es of employee turnover, disability and early retirement; (iii) the proportion of plan members with dependants who will be eligible for benefits; and (iv) claim rates under medical plans; and (b) financial assumptions, dealing with items such as: (i) the discount rate (see paragraphs 78-82); (ii) future salary and benefit levels (see paragraphs 83-87); (iii) in the case of medical benefits, future medical costs, including, where material, the cost of administering claims and benefit payments (see paragraphs 88-91); and (iv) the expected rate of return on plan assets (see paragraphs 107-109). 75. Actuarial assumptions are unbiased if they are neither imprudent nor excessively conservative. 76. Actuarial assumptions are mutually compatible if they reflect the economic relationships between factors such as inflation, rates of salary increase, the return on plan assets and discount rates. For example, all assumptions which depend on a particular inflation level (such as assumptions about interest rates and salary and benefit increases) in any given future period assume the same inflation level in that period. 77. An enterprise determines the discount rate and other fin....
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..... [Illustration I attached to the Standard illustrates the computation of interest cost, among other things] Actuarial Assumptions: Salaries, Benefits and Medical Costs 83. Post-employment benefit obligations should be measured on a basis that reflects: (a) estimated future salary increases; (b) the benefits set out in the terms of the plan (or resulting from any obligation that goes beyond those terms) at the balance sheet date; and (c) estimated future changes in the level of any state benefits that affect the benefits payable under a defined benefit plan, if, and only if, either: (i) those changes were enacted before the balance sheet date; or (ii) past history, or other reliable evidence, indicates that those state benefits will change in some predictable manner, for example, in line with future changes in general price levels or general salary levels. 84. Estimates of future salary increases take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. 85. If the formal terms of a plan (or an obligation that goes beyond those terms) require an enterprise to change benefits in future periods, the me....
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....lation used as a basis for the historical data. It is also adjusted where there is reliable evidence that historical trends will not continue. 91. Some post-employment health care plans require employees to contribute to the medical costs covered by the plan. Estimates of future medical costs take account of any such contributions, based on the terms of the plan at the balance sheet date (or based on any obligation that goes beyond those terms). Changes in those employee contributions result in past service cost or, where applicable, curtailments. The cost of meeting claims may be reduced by benefits from state or other medical providers (see paragraphs 83(c) and 87). Actuarial Gains and Losses 92. Actuarial gains and losses should be recognised immediately in the statement of profit and loss as income or expense (see paragraph 61). 92A. Paragraph 145(b)(iii) explains the need to consider any unrecognised part of the transitional liability in accounting for subsequent actuarial gains. 93. Actuarial gains and losses may result from increases or decreases in either the present value of a defined benefit obligation or the fair value of any related plan assets. Causes of actuarial....
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.... 120 on a straight-line basis over three years from 1 January 20X5. 96. Past service cost excludes:- (a) the effect of differences between actual and previously assumed salary increases on the obligation to pay benefits for service in prior years (there is no past service cost because actuarial assumptions allow for projected salaries); (b) under and over estimates of discretionary pension increases where an enterprise has an obligation to grant such increases (there is no past service cost because actuarial assumptions allow for such increases); (c) estimates of benefit improvements that result from actuarial gains that have already been recognised in the financial statements if the enterprise is obliged, by either the formal terms of a plan (or an obligation that goes beyond those terms) or legislation, to use any surplus in the plan for the benefit of plan participants, even if the benefit increase has not yet been formally awarded (the resulting increase in the obligation is an actuarial loss and not past service cost, see paragraph 85(b)); (d) the increase in vested benefits (not on account of new or improved benefits) when employees complete vesting requirements (the....
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....ce policies is deemed to be the present value of the related obligations, as described in paragraph 55 (subject to any reduction required if the amounts receivable under the insurance policies are not recoverable in full). Reimbursements 103. When, and only when, it is virtually certain that another party will reimburse some or all of the expenditure required to settle a defined benefit obligation, an enterprise should recognise its right to reimbursement as a separate asset. The enterprise should measure the asset at fair value. In all other respects, an enterprise should treat that asset in the same way as plan assets. In the statement of profit and loss, the expense relating to a defined benefit plan may be presented net of the amount recognised for a reimbursement. 104. Sometimes, an enterprise is able to look to another party, such as an insurer, to pay part or all of the expenditure required to settle a defined benefit obligation. Qualifying insurance policies, as defined in paragraph 7, are plan assets. An enterprise accounts for qualifying insurance policies in the same way as for all other plan assets and paragraph 103 does not apply (see paragraphs 40-43 and 102). 105....
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....ions of ₹ 4,900. At 31 December 20X1, the fair value of plan assets was ₹ 15,000 and the present value of the defined benefit obligation was ₹ 14,792. Actuarial losses on the obligation for 20×1 were ₹ 60. At 1 January 20X1, the reporting enterprise made the following estimates, based on market prices at that date: % Interest and dividend income, after tax payable by the fund 9.25 Realised and unrealised gains on plan assets (after tax) 2.00 Administration costs (1.00) --- Expected rate of return 10.25 --- For 20X1, the expected and actual return on plan assets are as follows: (Amount in Rs.) Return on ₹ 10,000 held for 12 months at 10.25% 1,025 Return on ₹ 3,000 held for six months at 5% (equivalent to 10.25% annually, compounded every six months) 150 Expected return on plan assets for 20X1 1,175 Fair value of plan assets at 31 December 20X1 15,000 Less fair value of plan assets at 1 January 20X1 (10,000) Less contributions received (4,900) Add benefits paid 1,900 Actual return on plan assets 2,000 The difference between the expected return on plan assets (Rs. 1,175) and the actual return on plan assets (Rs. ....
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....insurance policy to fund some or all of the employee benefits relating to employee service in the current and prior periods. The acquisition of such a policy is not a settlement if the enterprise retains an obligation (see paragraph 40) to pay further amounts if the insurer does not pay the employee benefits specified in the insurance policy. Paragraphs 103-106 deal with the recognition and measurement of reimbursement rights under insurance policies that are not plan assets. 115. A settlement occurs together with a curtailment if a plan is terminated such that the obligation is settled and the plan ceases to exist. However, the termination of a plan is not a curtailment or settlement if the plan is replaced by a new plan that offers benefits that are, in substance, identical. 116. Where a curtailment relates only to some of the employees covered by a plan, or where only part of an obligation is settled, the gain or loss includes a proportionate share of the previously unrecognised past service cost [and of transitional amounts remaining unrecognised under paragraph 145(b)]. The proportionate share is determined on the basis of the present value of the obligations before and afte....
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....y when, the enterprise: (a) has a legally enforceable right to use a surplus in one plan to settle obligations under the other plan; and (b) intends either to settle the obligations on a net basis, or to realise the surplus in one plan and settle its obligation under the other plan simultaneously. Financial Components of Post-employment Benefit Costs 118. This Standard does not specify whether an enterprise should present current service cost, interest cost and the expected return on plan assets as components of a single item of income or expense on the face of the statement of profit and loss. Provided that a Small and Medium-sized Company, as defined in the Notification, may not apply the presentation requirements laid down in paragraphs 117 to 118 of the Standard in respect of accounting for defined benefit plans. Disclosure 119. An enterprise should disclose information that enables users of financial statements to evaluate the nature of its defined benefit plans and the financial effects of changes in those plans during the period. 120. An enterprise should disclose the following information about defined benefit plans: (a) the enterprise s accounting policy for re....
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....cted return on any reimbursement right recognised as an asset in accordance with paragraph 103; (v) actuarial gains and losses; (vi) past service cost; (vii) the effect of any curtailment or settlement; and (viii) the effect of the limit in paragraph 59(b), i.e., the extent to which the amount determined in accordance with paragraph 55 (if negative) exceeds the amount determined in accordance with paragraph 59 (h) for each major category of plan assets, which should include, but is not limited to, quity instruments, debt instruments, property, and all other assets, the percentage or amount that each major category constitutes of the fair value of the total plan assets. (i) the amounts included in the fair value of plan assets for: (i) each category of the enterprise s own financial instruments; and (ii) any property occupied by, or other assets used by, the enterprise. (j) a narrative description of the basis used to determine the overall expected rate of return on assets, including the effect of the major categories of plan assets. (k) the actual return on plan assets, as well as the actual return on any reimbursement right recognised as an asset in accordance ....
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....plan during the annual period beginning after the balance sheet date. 121. Paragraph 120(b) requires a general description of the type of plan. Such a description distinguishes, for example, flat salary pension plans from final salary pension plans and from post-employment medical plans. The description of the plan should include informal practices that give rise to other obligations included in the measurement of the defined benefit obligation in accordance with paragraph 53. Further detail is not required. 122. When an enterprise has more than one defined benefit plan, disclosures may be made in total, separately for each plan, or in such groupings as are considered to be the most useful. It may be useful to distinguish groupings by criteria such as the following: (a) the geographical location of the plans, for example, by distinguishing domestic plans from foreign plans; or (b) whether plans are subject to materially different risks, for example, by distinguishing flat salary pension plans from final salary pension plans and from post-employment medical plans. When an enterprise provides disclosures in total for a grouping of plans, such disclosures are provided in the for....
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....o be settled directly (see paragraphs 100-102). In measuring the liability, an enterprise should apply paragraphs 49-91, excluding paragraphs 55 and 61. An enterprise should apply paragraph 103 in recognising and measuring any reimbursement right. 130. For other long-term employee benefits, an enterprise should recognise the net total of the following amounts as expense or (subject to paragraph 59) income, except to the extent that another Accounting Standard requires or permits their inclusion in the cost of an asset: (a) current service cost (see paragraphs 64-91); (b) interest cost (see paragraph 82); (c) the expected return on any plan assets (see paragraphs 107-109) and on any reimbursement right recognised as an asset (see paragraph 103); (d) actuarial gains and losses, which should all be recognised immediately; (e) past service cost, which should all be recognised immediately; and (f) the effect of any curtailments or settlements (see paragraphs 110 and 111). 131. One form of other long-term employee benefit is long-term disability benefit. If the level of benefit depends on the length of service, an obligation arises when the service is rendered. Measurement....
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....a desire to act equitably, to make payments (or provide other benefits) to employees when it terminates their employment. Such payments are termination benefits. Termination benefits are typically lump-sum payments, but sometimes also include: (a) enhancement of retirement benefits or of other post-employment benefits, either indirectly through an employee benefit plan or directly; and (b) salary until the end of a specified notice period if the employee renders no further service that provides economic benefits to the enterprise. 136. Some employee benefits are payable regardless of the reason for the employee s departure. The payment of such benefits is certain (subject to any vesting or minimum service requirements) but the timing of their payment is uncertain. Although such benefits may be described as termination indemnities, or termination gratuities, they are post-employment benefits, rather than termination benefits and an enterprise accounts for them as post employment benefits. Some enterprises provide a lower level of benefit for voluntary termination at the request of the employee (in substance, a post-employment benefit) than for involuntary termination at the req....
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....5, should be adjusted against opening balance of revenue reserves and surplus. Defined Benefit Plans 144. On first adopting this Standard, an enterprise should determine its transitional liability for defined benefit plans at that date as: (a) the present value of the obligation (see paragraph 65) at the date of adoption; (b) minus the fair value, at the date of adoption, of plan assets (if any) out of which the obligations are to be settled directly (see paragraphs 100-102); (c) minus any past service cost that, under paragraph 94, should be recognised in later periods. 145. If the transitional liability is more than the liability that would have been recognised at the same date as per the pre-revised AS 15, the enterprise should make an irrevocable choice to recognise that increase as part of its defined benefit liability under paragraph 55 :- (a) immediately as an adjustment against the opening balance of revenue reserve and surplus (as adjusted by any related tax expense); or (b) as an expense on a straight-line basis over up to five years from the date of adoption. If an enterprise chooses (b), the enterprise should :- (i) apply the limit described in paragraph....
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....recognise all actuarial gains and losses immediately. The effect of the limit in paragraph 145(b)(iii) is as follows : (Amount in Rs.) Net unrecognised actuarial gains 120 Unrecognised part of the transitional liability (136 x 4/5) 109 (If the enterprise adopts the policy of recognising it over 5 years) Maximum gain to be recognised 11 Termination Benefits 146. This Standard requires immediate expensing of expenditure on termination benefits (including expenditure incurred on voluntary retirement scheme (VRS)). However, where an enterprise incurs expenditure on termination benefits on or before 31st March, 2009 within three years of this Statement first coming into effect, the enterprise may choose to follow the accounting policy of deferring such expenditure over its pay-back period. However, the expenditure so deferred cannot be carried forward to accounting periods commencing on or after 1st April, 2010 subject to a maximum of 5 years. Illustration I Illustration This illustration is illustrative only and does not form part of the Standard. The purpose of the illustration is to illustrate the application of the Standard to assist in clarifying its meaning. Extract....
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....(87) 42 Present value of obligation, 31 March 1,141 1,197 1,295 Fair value of plan assets, 1 April 1,000 1,092 1,109 Expected return on plan assets 120 121 114 Contributions 90 100 110 Benefits paid (150) (180) (190) Actuarial gain (loss) on plan assets (balancing figure) 32 (24) (50) Fair value of plan assets, 31 March 1,092 1,109 1,093 Total actuarial gain (loss) to be recognised immediately as per the Standard (29) 63 (92) Amounts Recognised in the Balance Sheet and Statements of Profit and Loss, and Related Analyses The final step is to determine the amounts to be recognised in the balance sheet and statement of profit and loss, and the related analyses to be disclosed under in accordance with paragraphs 119120(c), (e), (f), and (g) and (j) of the Statement (the analyses required to be disclosed in accordance with paragraph 120(c) and (e) are given in the section of this Appendix 'Changes in the Present Value of the Obligation and in the Fair Value of the Plan Assets ). These are as follows: (Amount in Rs.) 20X4-X5 20X5-X6 20X6-X7 Present value of the obligation 1,141 1,197 1,295 Fair value of plan assets (1,092) (1,109) (1,093) 4....
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.... 3,430 470 7,337 6,405 Amounts in the balance sheet: Liabilities 3,430 560 7,337 6,405 Assets - (90) - - Net liability 3,430 470 7,337 6,405 The pension plan assets include equity shares issued by [name of reporting enterprise] with a fair value of ₹ 317 (20X4-X5: ₹ 281). Plan assets also include property occupied by [name of reporting enterprise] with a fair value of ₹ 200 (20X4-X5: ₹ 185). The amounts (in Rs.) recognised in the statement of profit and loss are as follows: Defined benefit pension plans Post-employment medical benefits 20X5-X6 20X4-X5 20X5-X6 20X4-X5 Current service cost 850 750 479 411 Interest on obligation 950 1,000 803 705 Expected return on plan assets (900) (650) Net actuarial losses (gains) recognised in year 2650 (650) 250 400 Past service cost 200 200 - - Losses (gains) on curtailments and settlements 175 (390) - - Total, included in 'employee benefit expense 3,925 260 1,532 1,516 Actual return on plan assets 600 2,250 - - Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows: D....
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....ption given above, are expected to increase at 8% p.a. A one percentage point change in assumed healthcare cost trend rates would have the following effects on the aggregate of the service cost and interest cost and defined benefit obligation: One percentage point increase One percentage point decrease Effect on the aggregate of the service cost and interest cost 190 (150) Effect on defined benefit obligation 1,000 (900) Amounts for the current and previous four periods are as follows: Defined benefit pension plans 20X5-X6 20X4-X5 20X3-X4 20X2-X3 20X1-X2 Defined benefit obligation (22,300) (18,400) (11,600) (10,582) (9,144) Plan assets 18,420 17,280 9,200 8,502 10,000 Surplus/(deficit) (3,880) (1,120) (2,400) (2,080) 856 Experience adjustments on plan liabilities (1,111) (768) (69) 543 (642) Experience adjustments on plan assets (300) 1,600 (1,078) (2,890) 2,777 Post-employment medical benefits 20X5-X6 20X4-X5 20X3-X4 20X2-X3 20X1-X2 Defined benefit obligation 7,337 6,405 5,439 4,923 4,221 Experience adjustments on plan liabilities (232) 829 490 (174) (103) The group also participates in an industry-wide defined benefit plan w....