TaxTMI 
TaxTMI 
Employee Benefits
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....other formal agreements between an entity and individual employees, groups of employees or their representatives; (b) under legislative requirements, or through industry arrangements, whereby entities are required to contribute to national, state, industry or other multi-employer plans; or (c) by those informal practices that give rise to a constructive obligation. 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. 5 Employee benefits include: (a) short-term employee benefits, such as the following, if expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services: (i) wages, salaries and social security contributions; (ii) paid annual leave and paid sick leave; (iii) profit-sharing and bonuses; and (iv) non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or s....
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....ment benefit plans are formal or informal arrangements under which an entity provides post-employment benefits for one or more employees. Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Defined benefit plans are post-employment benefit plans other than defined contribution plans. Multi-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 entities that are not under common control; and (b) use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels are determined without regard to the identity of the entity that employs the employees. Definitions relating to the net defined benefit liability (asset) The net defined benefit liability (asset) is the deficit or surplus, adj....
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....lue Measurement.) Definitions relating to defined benefit cost Service cost comprises: (a) current service cost, which is the increase in the present value of the defined benefit obligation resulting from employee service in the current period; (b) past service cost, which is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan); and (c) any gain or loss on settlement. Net interest on the net defined benefit liability (asset) is the change during the period in the net defined benefit liability (asset) that arises from the passage of time. Remeasurements of the net defined benefit liability (asset) comprise: (a) actuarial gains and losses; (b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and (c) any change in the effect of the asset ceiling, excluding amounts included in net interest on the ne....
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....rued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, an entity shall recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund. (b) as an expense, unless another Ind AS requires or permits the inclusion of the benefits in the cost of an asset (see, for example, Ind AS 2, Inventories, and Ind AS 16, Property, Plant and Equipment). 12 Paragraphs 13, 16 and 19 explain how an entity shall apply paragraph 11 to short-term employee benefits in the form of paid absences and profit-sharing and bonus plans. Short-term paid absences 13 An entity shall recognise the expected cost of short-term employee benefits in the form of paid absences under paragraph 11 as follows: (a) in the case of accumulating paid absences, when the employees render service that increases their entitlement to future paid absences. (b) in the case of non-accumulating paid absences, when the absences occur. 14 An entity may pay employees for absence for various reasons including holidays, sickness and ....
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....expects that it will pay an additional twelve days of sick pay as a result of the unused entitlement that has accumulated at 31 December 20X1 (one and a half days each, for eight employees). Therefore, the entity recognises a liability equal to twelve days of sick pay. 18 Non-accumulating paid absences do not carry forward: they lapse if the current period's entitlement is not used in full and do not entitle employees to a cash payment for unused entitlement on leaving the entity. This is commonly the case for sick pay (to the extent that unused past entitlement does not increase future entitlement), maternity or paternity leave and paid absences for jury service or military service. An entity recognises no liability or expense until the time of the absence, because employee service does not increase the amount of the benefit. Profit-sharing and bonus plans 19 An entity shall recognise the expected cost of profit-sharing and bonus payments under paragraph 11 when, and only when: (a) the entity has a present legal or constructive obligation to make such payments as a result of past events; and (b) a reliable estimate of the obligation can b....
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....other long-term employee benefits (see paragraphs 153-158). Disclosure 25 Although this Standard does not require specific disclosures about short-term employee benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits for key management personnel. Ind AS 1, Presentation of Financial Statements, requires disclosure of employee benefits expense. Post-employment benefits: distinction between defined contribution plans and defined benefit plans 26 Post-employment benefits include items such as the following: (a) retirement benefits (eg pensions and lump sum payments on retirement); and (b) other post-employment benefits, such as post-employment life insurance and post-employment medical care. Arrangements whereby an entity provides post-employment benefits are post-employment benefit plans. An entity applies this Standard to all such arrangements whether or not they involve the establishment of a separate entity to receive contributions and to pay benefits. 27 Post-employment benefit plans are classified as either defined contribution plans or defined benefit plans, depending on the economic....
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....the formal terms). 33 If an entity participates in a multi-employer defined benefit plan, unless paragraph 34 applies, it shall: (a) account for its proportionate share of the defined benefit obligation, plan assets and cost associated with the plan in the same way as for any other defined benefit plan; and (b) disclose the information required by paragraphs 135-148 (excluding paragraph 148(d)). 34 When sufficient information is not available to use defined benefit accounting for a multiemployer defined benefit plan, an entity shall: (a) account for the plan in accordance with paragraphs 51 and 52 as if it were a defined contribution plan; and (b) disclose the information required by paragraph 148. 35 One example of a multi-employer defined benefit plan is one where: (a) the plan is financed on a pay-as-you-go basis: contributions are set at a level that is expected to be sufficient to pay the benefits falling due in the same period; and future benefits earned during the current period will be paid out of future contributions; and (b) employees' benefits are determined by the length of their service and the participatin....
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....an has agreed under contract a schedule of contributions with the participating employers in the plan that will eliminate the deficit over the next five years. The entity's total contributions under the contract are Rs. 8 million. The entity recognises a liability for the contributions adjusted for the time value of money and an equal expense in profit or loss. 38 Multi-employer plans are distinct from group administration plans. A group administration plan is merely an aggregation of single employer plans combined to allow participating employers to pool their assets for investment purposes and reduce investment management and administration costs, but the claims of different employers are segregated for the sole benefit of their own employees. Group administration plans pose no particular accounting problems because information is readily available to treat them in the same way as any other single employer plan and because such plans do not expose the participating entities to actuarial risks associated with the current and former employees of other entities. The definitions in this Standard require an entity to classify a group administration plan as a defined contribution....
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....d otherwise be covered under a state plan, and additional voluntary benefits. Such plans are not state plans. 45 State plans are characterised as defined benefit or defined contribution, depending on the entity's obligation under the plan. Many state plans are funded on a pay-as-you-go basis: contributions are set at a level that is expected to be sufficient to pay the required benefits falling due in the same period; future benefits earned during the current period will be paid out of future contributions. Nevertheless, in most state plans the entity has no legal or constructive obligation to pay those future benefits: its only obligation is to pay the contributions as they fall due and if the entity ceases to employ members of the state plan, it will have no obligation to pay the benefits earned by its own employees in previous years. For this reason, state plans are normally defined contribution plans. However, when a state plan is a defined benefit plan an entity applies paragraphs 32-39. Insured benefits 46 An entity may pay insurance premiums to fund a post-employment benefit plan. The entity shall treat such a plan as a defined contribution plan unless the entity wi....
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....ion 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 are not expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. Recognition and measurement 51 When an employee has rendered service to an entity during a period, the entity shall recognise the contribution payable to a defined contribution plan in exchange for that service: (a) as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, an entity shall recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund. (b) as an expense, unless another Ind AS requires or permits the inclusion of the contribution in the cost of an asset (see, for example, Ind AS 2 and Ind AS 16). 52 When contributions to a defined contribution plan are not expected to be settled wholly before twelve ....
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.... (see paragraphs 75-98). (ii) discounting that benefit in order to determine the present value of the defined benefit obligation and the current service cost (see paragraphs 67-69 and 83-86). (iii) deducting the fair value of any plan assets (see paragraphs 113-115) from the present value of the defined benefit obligation. (b) determining the amount of the net defined benefit liability (asset) as the amount of the deficit or surplus determined in (a), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling (see paragraph 64). (c) determining amounts to be recognised in profit or loss: ^3[(i) current service cost (see paragraphs 70-74 and paragraph 122A).] (ii) any past service cost and gain or loss on settlement (see paragraphs 99-112). (iii) net interest on the net defined benefit liability (asset) (see paragraphs 123-126). (d) determining the re-measurements of the net defined benefit liability (asset), to be recognised in other comprehensive income, comprising: (i) actuarial gains and losses (see paragraphs 128 and 129); (ii) return on plan assets, excluding amo....
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.... lives of employees. Balance Sheet 63 An entity shall recognise the net defined benefit liability (asset) in the balance sheet. 64 When an entity has a surplus in a defined benefit plan, it shall measure the net defined benefit asset at the lower of: (a) the surplus in the defined benefit plan; and (b) the asset ceiling, determined using the discount rate specified in paragraph 83. 65 A net defined benefit asset may arise where a defined benefit plan has been overfunded or where actuarial gains have arisen. An entity recognises a net defined benefit asset in such cases because: (a) the entity controls a resource, which is the ability to use the surplus to generate future benefits; (b) that control is a result of past events (contributions paid by the entity and service rendered by the employee); and (c) future economic benefits are available to the entity in the form of a reduction in future contributions or a cash refund, either directly to the entity or indirectly to another plan in deficit. The asset ceiling is the present value of those future benefits. Recognition and measurement: present value of defined benef....
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.... 196 324 476 Interest at 10% - 9 20 33 48 Current service cost 89 98 108 119 131 Closing Obligation 89 196 324 476 655 Note: 1. The opening obligation is the present value of the benefit attributed to prior years. 2. The current service cost is the present value of the benefit attributed to the current year. 3. The closing obligation is the present value of the benefit attributed to current and prior years. 69 An entity discounts the whole of a post-employment benefit obligation, even if part of the obligation is expected to be settled before twelve months after the reporting period. Attributing benefit to periods of service 70 In determining the present value of its defined benefit obligations and the related current service cost and, where applicable, past service cost, an entity shall attribute benefit 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 entity shall attribute benefit on a straight-line basis from: (a) th....
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....ice up to the end of the reporting period. The current service cost and the present value of the defined benefit obligation are discounted because pension payments begin at the age of 65. 72 Employee service gives rise to an obligation under a defined benefit plan even if the benefits are conditional on future employment (in other words they are not vested). Employee service before the vesting date gives rise to a constructive obligation because, at the end of each successive reporting period, the amount of future service that an employee will have to render before becoming entitled to the benefit is reduced. In measuring its defined benefit obligation, an entity considers the probability that some employees may not satisfy any vesting requirements. Similarly, although some postemployment benefits, for example, post-employment medical benefits, become payable only if a specified event occurs when an employee is no longer employed, an obligation is created when the employee 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....
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....s). Those benefits are conditional on further service. Also, service beyond the age of 55 will lead to no material amount of further benefits. For these employees, the entity attributes benefit of Rs. 100 (Rs.2,000 divided by twenty) to each year from the age of 35 to the age of 55. For employees who join between the ages of 35 and 45, service beyond twenty years will lead to no material amount of further benefits. For these employees, the entity attributes benefit of 100 (2,000 divided by twenty) to each of the first twenty years. For an employee who joins at the age of 55, service beyond ten years will lead to no material amount of further benefits. For this employee, the entity attributes benefit of Rs. 200 (Rs.2,000 divided by ten) to each of the first ten years. For all employees, the current service cost and the present value of the obligation reflect the probability that the employee may not complete the necessary period of service. 3. A post-employment medical plan reimburses 40 per cent of an employee's post-employment medical costs if the employee leaves after more than ten and less than twenty years of service and 50 per cent of those costs if the employee le....
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.... The amount of gratuity attributed to each year of service will be calculated as follows: Number of employees not likely to fulfil the eligibility criteria will be ignored. Other employees will be grouped according to period of service they are expected to render taking into account mortality rate, disablement and resignation after 5 years. Gratuity payable will be calculated in accordance with the formula prescribed in the governing statute based on the period of service and the salary at the time of termination of employment, assuming promotion, salary increases etc. For those employees for whom the amount payable as per the formula does not exceed Rs. 1,000,000, over the expected period of service, the amount payable will be divided by the expected period of service and the resulting amount will be attributed to each year of the expected period of service, including the period before the stipulated period of 5 years. In case of the remaining employees, the amount as per the formula exceeds Rs. 1,000,000 over the expected period of service of 10 years, and the amount of the statutory threshold of Rs. 1,000,000 is reached at the end of 8 years. Rs. 1,25,000 (Rs. 1,000....
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.... the case of medical benefits, future medical costs, including claim handling costs (ie the costs that will be incurred in processing and resolving claims, including legal and adjuster's fees) (see paragraphs 96-98); and (iv) taxes payable by the plan on contributions relating to service before the reporting date or on benefits resulting from that service. 77 Actuarial assumptions are unbiased if they are neither imprudent nor excessively conservative. 78 Actuarial assumptions are mutually compatible if they reflect the economic relationships between factors such as inflation, rates of salary increase and discount rates. For example, all assumptions that 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. 79 An entity determines the discount rate and other financial assumptions in nominal (stated) terms, unless estimates in real (inflation-adjusted) terms are more reliable, for example, in a hyperinflationary economy (see Ind AS 29, Financial Reporting in Hyperinflationary Economies), or where the benefit is index-linked and the....
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....fined benefit obligation is unlikely to be particularly sensitive to the discount rate applied to the portion of benefits that is payable beyond the final maturity of the available government bonds. Actuarial assumptions: salaries, benefits and medical costs 87 An entity shall measure its defined benefit obligations on a basis that reflects: (a) the benefits set out in the terms of the plan (or resulting from any constructive obligation that goes beyond those terms) at the end of the reporting period; (b) any estimated future salary increases that affect the benefits payable; (c) the effect of any limit on the employer's share of the cost of the future benefits; (d) contributions from employees or third parties that reduce the ultimate cost to the entity of those benefits; and (e) 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 end of the reporting period; or (ii) historical data, or other reliable evidence, indicate that those state benefits will change in some predictable ....
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....re a reimbursement right as described in paragraph 116. Contributions by employees or third parties are either set out in the formal terms of the plan (or arise from a constructive obligation that goes beyond those terms), or are discretionary. Discretionary contributions by employees or third parties reduce service cost upon payment of these contributions to the plan. 93 Contributions from employees or third parties set out in the formal terms of the plan either reduce service cost (if they are linked to service), or affect remeasurements of the net defined benefit liability (asset) (if they are not linked to service). An example of contributions that are not linked to service is when the contributions are required to reduce a deficit arising from losses on plan assets or from actuarial losses. If contributions from employees or third parties are linked to service, those contributions reduce the service cost as follows: (a) if the amount of the contributions is dependent on the number of years of service, an entity shall attribute the contributions to periods of service using the same attribution method required by paragraph 70 for the gross benefit (ie either using th....
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....ulation differs from that of the population used as a basis for the data. They are also adjusted where there is reliable evidence that historical trends will not continue. Past service cost and gains and losses on settlement ^4[99 When determining past service cost, or a gain or loss on settlement, an entity shall remeasure the net defined benefit liability (asset) using the current fair value of plan assets and current actuarial assumptions, including current market interest rates and other current market prices, reflecting: (a) the benefits offered under the plan and the plan assets before the plan amendment, curtailment or settlement; and (b) the benefits offered under the plan and the plan assets after the plan amendment, curtailment or settlement.] 100 An entity need not distinguish between past service cost resulting from a plan amendment, past service cost resulting from a curtailment and a gain or loss on settlement if these transactions occur together. In some cases, a plan amendment occurs before a settlement, such as when an entity changes the benefits under the plan and settles the amended benefits later. In those cases an entity recognises pa....
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....ary 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) underestimates and overestimates of discretionary pension increases when an entity has a constructive 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 or from the return on plan assets that have been recognised in the financial statements if the entity is obliged, by either the formal terms of a plan (or a constructive 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 (there is no past service cost because the resulting increase in the obligation is an actuarial loss, see paragraph 88); and (d) the increase in vested benefits (ie benefits that are not conditional on future employment, see paragraph 72) when, in the absence of new or improved benefits, employees complete vesting requirements (there is no past ....
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....ies resulting from derivative financial instruments. 115 Where plan assets include qualifying insurance policies that exactly match the amount and timing of some or all of the benefits payable under the plan, the fair value of those insurance policies is deemed to be the present value of the related obligations (subject to any reduction required if the amounts receivable under the insurance policies are not recoverable in full). Reimbursements 116 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 entity shall: (a) recognise its right to reimbursement as a separate asset. The entity shall measure the asset at fair value. (b) disaggregate and recognise changes in the fair value of its right to reimbursement in the same way as for changes in the fair value of plan assets (see paragraphs 124 and 125).The components of defined benefit cost recognised in accordance with paragraph 120 may be recognised net of amounts relating to changes in the carrying amount of the right to reimbursement. 117 Sometimes, an entity is able to look to another party, s....
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....vice cost 122A An entity shall determine current service cost using actuarial assumptions determined at the start of the annual reporting period. However, if an entity remeasures the net defined benefit liability (asset) in accordance with paragraph 99, it shall determine current service cost for the remainder of the annual reporting period after the plan amendment, curtailment or settlement using the actuarial assumptions used to remeasure the net defined benefit liability (asset) in accordance with paragraph 99(b).] Net interest on the net defined benefit liability (asset) ^8[123 An entity shall determine net interest on the net defined benefit liability (asset) by multiplying the net defined benefit liability (asset) by the discount rate specified in paragraph 83.] ^9[123A To determine net interest in accordance with paragraph 123, an entity shall use the net defined benefit liability (asset) and the discount rate determined at the start of the annual reporting period. However, if an entity remeasures the net defined benefit liability (asset) in accordance with paragraph 99, the entity shall determine net interest for the remainder of the annual reporting period afte....
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....n the effect of the asset ceiling determined in accordance with paragraph 101A. The difference between interest on the effect of the asset ceiling and the total change in the effect of the asset ceiling is included in the remeasurement of the net defined benefit liability (asset).] Remeasurements of the net defined benefit liability (asset) 127 Remeasurements of the net defined benefit liability (asset) comprise: (a) actuarial gains and losses (see paragraphs 128 and 129); (b) the return on plan assets (see paragraph 130), excluding amounts included in net interest on the net defined benefit liability (asset) (see paragraph 125); and (c) any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset) (see paragraph 126). 128 Actuarial gains and losses result from increases or decreases in the present value of the defined benefit obligation because of changes in actuarial assumptions and experience adjustments. Causes of actuarial gains and losses include, for example: (a) unexpectedly high or low rates of employee turnover, early retirement or mortality or of increase....
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....n the net defined benefit liability (asset). An entity presents those components in accordance with Ind AS1. Disclosure 135 An entity shall disclose information that: (a) explains the characteristics of its defined benefit plans and risks associated with them (see paragraph 139); (b) identifies and explains the amounts in its financial statements arising from its defined benefit plans (see paragraphs 140-144); and (c) describes how its defined benefit plans may affect the amount, timing and uncertainty of the entity's future cash flows (see paragraphs 145-147). 136 To meet the objectives in paragraph 135, an entity shall consider all the following: (a) the level of detail necessary to satisfy the disclosure requirements; (b) how much emphasis to place on each of the various requirements; (c) how much aggregation or disaggregation to undertake; and (d) whether users of financial statements need additional information to evaluate the quantitative information disclosed. 137 If the disclosures provided in accordance with the requirements in this Standard and other Ind ASs are insufficient to meet the objectives ....
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....ents and settlements. Explanation of amounts in the financial statements 140 An entity shall provide a reconciliation from the opening balance to the closing balance for each of the following, if applicable: (a) the net defined benefit liability (asset), showing separate reconciliations for: (i) plan assets. (ii) the present value of the defined benefit obligation. (iii) the effect of the asset ceiling. (b) any reimbursement rights. An entity shall also describe the relationship between any reimbursement right and the related obligation. 141 Each reconciliation listed in paragraph 140 shall show each of the following, if applicable: (a) current service cost. (b) interest income or expense. (c) remeasurements of the net defined benefit liability (asset), showing separately: (i) the return on plan assets, excluding amounts included in interest in (b). (ii) actuarial gains and losses arising from changes in demographic assumptions (see paragraph 76(a)). (iii) actuarial gains and losses arising from changes in financial assumptions (see paragraph 76(b)). (iv) changes in ....
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....and not just as a margin between different percentages and other variables). When an entity provides disclosures in total for a grouping of plans, it shall provide such disclosures in the form of weighted averages or relatively narrow ranges. Amount, timing and uncertainty of future cash flows 145 An entity shall disclose: (a) a sensitivity analysis for each significant actuarial assumption (as disclosed under paragraph 144) as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at that date. (b) the methods and assumptions used in preparing the sensitivity analyses required by (a) and the limitations of those methods. (c) changes from the previous period in the methods and assumptions used in preparing the sensitivity analyses, and the reasons for such changes. 146 An entity shall disclose a description of any asset-liability matching strategies used by the plan or the entity, including the use of annuities and other techniques, such as longevity swaps, to manage risk. 147 To provide an indication of the effec....
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....to benefits, if that information is available. Defined benefit plans that share risks between entities under common control 149 If an entity participates in a defined benefit plan that shares risks between entities under common control, it shall disclose: (a) the contractual agreement or stated policy for charging the net defined benefit cost or the fact that there is no such policy. (b) the policy for determining the contribution to be paid by the entity. (c) if the entity accounts for an allocation of the net defined benefit cost as noted in paragraph 41, all the information about the plan as a whole required by paragraphs 135-147. (d) if the entity accounts for the contribution payable for the period as noted in paragraph 41, the information about the plan as a whole required by paragraphs 135-137, 139, 142-144 and 147(a) and (b). 150 The information required by paragraph 149(c) and (d) can be disclosed by cross-reference to disclosures in another group entity's financial statements if: (a) that group entity's financial statements separately identify and disclose the information required about the plan; and (b) that ....
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....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 of that obligation reflects the probability that payment will be required and the length of time for which payment is expected to be made. If the level of benefit is the same for any disabled employee regardless of years of service, the expected cost of those benefits is recognised when an event occurs that causes a long-term disability. Disclosure 158 Although this Standard does not require specific disclosures about other long-term employee benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits for key management personnel. Ind AS 1 requires disclosure of employee benefits expense. Termination benefits 159 This Standard deals with termination benefits separately from other employee benefits because the event that gives rise to an obligation is the termination of employment rather than employee service. Termination benefits result from either an entity's decision to terminate the employment or an employee's decision to accept an entity....
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....rom an entity's decision to terminate an employee's employment and are not conditional on future service being provided. 164 Some employee benefits are provided 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 are described in some jurisdictions as termination indemnities or termination gratuities, they are post-employment benefits rather than termination benefits, and an entity accounts for them as post-employment benefits. Recognition 165 An entity shall recognise a liability and expense for termination benefits at the earlier of the following dates: (a) when the entity can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits. 166 For termination benefits payable as a result of an employee's decision to accept an offer of benefits in exchange for the termination of employment, the time when an entity can no longer withdraw the offer of termi....
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....periods of service are not relevant. Example illustrating paragraphs 159-170 Background As a result of a recent acquisition, an entity plans to close a factory in ten months and, at that time, terminate the employment of all of the remaining employees at the factory. Because the entity needs the expertise of the employees at the factory to complete some contracts, it announces a plan of termination as follows. Each employee who stays and renders service until the closure of the factory will receive on the termination date a cash payment of Rs. 30,000. Employees leaving before closure of the factory will receive Rs. 10,000. There are 120 employees at the factory. At the time of announcing the plan, the entity expects 20 of them to leave before closure. Therefore, the total expected cash outflows under the plan are Rs. 3,200,000 (ie 20 x Rs. 10,000 + 100 x Rs. 30,000). As required by paragraph 160, the entity accounts for benefits provided in exchange for termination of employment as termination benefits and accounts for benefits provided in exchange for services as short-term employee benefits. Termination benefits The benefit provided in exchange for terminatio....
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...., curtailments or settlements occurring on or after the beginning of the first annual reporting period that begins on or after 1 April, 2019.] Appendix A Application Guidance This appendix is an integral part of the Ind AS. It describes the application of paragraphs 92- 93 and has the same authority as the other parts of the Ind AS. A1 The accounting requirements for contributions from employees or third parties are illustrated in the diagram below. Appendix B Ind AS 19 -The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction This Appendix is an integral part of the Ind AS. Background 1 Paragraph 64 of Ind 19 limits the measurement of a net defined benefit asset to the lower of the surplus in the defined benefit plan and the asset ceiling. Paragraph 8 of Ind AS 19 defines the asset ceiling as 'the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan'. Questions have arisen about when refunds or reductions in future contributions should be regarded as available, particularly when a minimum funding requirement exists. 2 Mini....
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....e surplus. An entity shall determine the maximum economic benefit that is available from refunds, reductions in future contributions or a combination of both. An entity shall not recognise economic benefits from a combination of refunds and reductions in future contributions based on assumptions that are mutually exclusive. 10 In accordance with Ind AS 1, the entity shall disclose information about the key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amount of the net asset or liability recognised in the balance sheet. This might include disclosure of any restrictions on the current realisability of the surplus or disclosure of the basis used to determine the amount of the economic benefit available. The economic benefit available as a refund The right to a refund 11 A refund is available to an entity only if the entity has an unconditional right to a refund: (a) during the life of the plan, without assuming that the plan liabilities must be settled in order to obtain the refund (eg in some jurisdictions, the entity may have a right to a refund during the life ....
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.... benefit obligation and with the situation that exists at the end of the reporting period as determined by Ind AS 19. Therefore, an entity shall assume no change to the benefits to be provided by a plan in the future until the plan is amended and shall assume a stable workforce in the future unless the entity makes a reduction in the number of employees covered by the plan. In the latter case, the assumption about the future workforce shall include the reduction. The effect of a minimum funding requirement on the economic benefit available as a reduction in future contributions 18 An entity shall analyse any minimum funding requirement at a given date into contributions that are required to cover (a) any existing shortfall for past service on the minimum funding basis and (b) future service. 19 Contributions to cover any existing shortfall on the minimum funding basis in respect of services already received do not affect future contributions for future service. They may give rise to a liability in accordance with paragraphs 23-26. 20 If there is a minimum funding requirement for contributions relating to future service, the economic benefit available as a reduction in f....
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....n arises. The liability shall reduce the net defined benefit asset or increase the net defined benefit liability so that no gain or loss is expected to result from applying paragraph 64 of Ind AS 19 when the contributions are paid. 25-26 (refer Appendix 1) Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 19 and the corresponding International Accounting Standard (IAS) 19, Employee Benefits, and IFRIC 14, IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, issued by the International Accounting Standards Board. Comparison with IAS 19, Employee Benefits, and IFRIC 14 1 Paragraph numbers 25-26 appear as 'Deleted' in IFRIC 14. In order to maintain consistency with paragraph numbers of IFRIC 14, the paragraph numbers are retained in Appendix B of Ind AS 19. ^2[ According to Ind AS 19 the rate to be used to discount post-employment benefit obligation shall be determined by reference to the market yields on government bonds, whereas under IAS 19 , the government bonds can....
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.... the rate to be used to discount post-employment benefit obligation shall be determined by reference to the market yields on government bonds, whereas under IAS 19 , the government bonds can be used only where there is no deep market of high quality corporate bonds. However, requirements given in IAS 19 in this regard have been retained with appropriate modifications for subsidiaries, associates, joint ventures and branches domiciled outside India. " 3. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VIII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as (i) current service cost (see paragraphs 70-74). 4. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VIII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as "99 Before determining past service cost, or a gain or loss on settlement, an entity shall remeasure the net defined benefit liability (asset) using the current fair value of plan assets and current actuarial assumptions (including current market interest rates and other current market prices) reflecting the benefits offered under the plan before the plan amendment, curtailment or settlement. " 5. Inserted ....