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Thread: 11 - Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

  1. #41
    IND-AS
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    Thumbs up Recognition of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Recognition of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Recognition

    133. An entity shall recognise termination benefits as a liability and an expense when, and only when, the entity is demonstrably committed to either:

    (a) terminate the employment of an employee or group of employees before the normal retirement date; or

    (b) provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.

    134. An entity is demonstrably committed to a termination when, and only when, the entity has a detailed formal plan for the termination and is without realistic possibility of withdrawal. The detailed plan shall include, as a minimum:

    (a) the location, function, and approximate number of employees whose services are to be terminated;
    (b) the termination benefits for each job classification or function; and
    (c) the time at which the plan will be implemented. Implementation shall begin as soon as possible and the period of time to complete implementation shall be such that material changes to the plan are not likely.

    135. An entity may be committed, by legislation, by contractual or other agreements with employees or their representatives or by a constructive obligation based on business practice, custom or 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 entity.

    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 are described in some countries 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. Some entities 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 request of the entity. The additional benefit payable on involuntary termination is a termination benefit.

    137. Termination benefits do not provide an entity with future economic benefits and are recognised as an expense immediately.

    138. Where an entity recognises termination benefits, the entity may also have to account for a curtailment of retirement benefits or other employee benefits (see paragraph 109).


  2. #42
    IND-AS
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    Thumbs up Measurement of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Measurement of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Measurement

    139. Where termination benefits fall due more than 12 months after the reporting period, they shall be discounted using the discount rate specified in paragraph 78.

    140. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits shall be based on the number of employees expected to accept the offer.


  3. #43
    IND-AS
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    Thumbs up Disclosure of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Disclosure of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits



    Disclosure

    141. Where there is uncertainty about the number of employees who will accept an offer of termination benefits, a contingent liability exists. As required by Ind AS 37 an entity discloses information about the contingent liability unless the possibility of an outflow in settlement is remote.

    142. As required by Ind AS 1, an entity discloses the nature and amount of an expense if it is material. Termination benefits may result in an expense needing disclosure in order to comply with this requirement.

    143. Where required by Ind AS 24 an entity discloses information about termination benefits for key management personnel.


  4. #44
    IND-AS
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    Thumbs up APPENDIX - A of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    APPENDIX - A of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    APPENDIX - A


    This Appendix, except the portion relating to illustrative examples, is an integral part of the Standard.

    Ind AS 19 —The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction


    Background

    1. Paragraph 58 of Ind AS 19 limits the measurement of a defined benefit asset to ‘the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan’ plus unrecognised past service cost. Questions have arisen about when refunds or reductions in future contributions should be regarded as avail able, particularly when a minimum funding requirement exists.

    2. Minimum funding requirements exist in many countries to improve the security of the post-employment benefit promise made to members of an employee benefit plan. Such requirements normally stipulate a minimum amount or level of contributions that must be made to a plan over a given period. Therefore, a minimum funding requirement may limit the ability of the entity to reduce future contributions.

    3. Further, the limit on the measurement of a defined benefit asset may cause a minimum funding requirement to be onerous. Normally, a requirement to make contributions to a plan would not affect the measurement of the defined benefit asset or liability. This is because the contributions, once paid, will become plan assets and so the additional net liability is nil. However, a minimum funding requirement may give rise to a liability if the required contributions will not be available to the entity once they have been paid.

    Scope

    4. This Appendix applies to all post-employment defined benefits and other long -term employee defined benefits.

    5. For the purpose of this Appendix, minimum funding requirements are any requirements to fund a post -employment or other long-term defined benefit plan.

    Issues

    6. The issues addressed in this Appendix are:

    (a) when refunds or reductions in future contributions should be regarded as available in accordance with paragraph 58 of Ind AS 19.
    (b) how a minimum funding requirement might affect the availability of reductions in future contributions.
    (c) when a minimum funding requirement might give rise to a liability.

    Principles

    Availability of a refund or reduction in future contributions

    7. An entity shall determine the availability of a refund or a reduction in future contributions in accordance with the terms and conditions of the plan and any statutory requirements in the jurisdiction of the plan.

    8. An economic benefit, in the form of a refund or a reduction in future contributions, is available if the entity can realise it at some point during the life of the plan or when the plan liabilities are settled. In particular, such an economic benefit may be available even if it is not realisable immediately at the end of the reporting period.

    9. The economic benefit available does not depend on how the entity intends to use the 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 th e 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 of the plan, irrespective of whether the plan liabilities are settled); or
    (b) assuming the gradual settlement of the plan liabilities over time until all members have left the plan; or
    (c) assuming the full settlement of the plan liabilities in a single event (ie as a plan wind-up).

    An unconditional right to a refund can exist whatever the funding level of a plan at the end of the reporting period.

    12. If the entity’s right to a refund of a surplus depends on the occurrence or non - occurrence of one or more uncertain future events not wholly within its control, the entity does not have an unconditional right and shall not recognise an asset.

    Measurement of the economic benefit

    13. An entity shall measure the economic benefit available as a refund as the amount of the surplus at the end of the reporting period (being the fair value of the plan assets less the present value of the defined benefit obligation) that the entity has a right to receive as a refund, less any associated costs. For instance, if a refund would be subject to a tax other than income tax, an entity shall measure the amount of the refund net of the tax.

    14. In measuring the amount of a refund available when the plan is wound up (paragraph 11(c)), an entity shall include the costs to the plan of settling the plan liabilities and making the refund. For example, an entity shall deduct professional fees if these are paid by the plan rather than the entity, and the costs of any insurance premiums that may be required to secure the liability on wind-up.

    15. If the amount of a refund is determined as the full amount or a proportion of the surplus, rather than a fixed amount, an entity shall make no adjustment for the time value of money, even if the refund is realisable only at a future date.

    The economic benefit available as a contribution reduction


    16. If there is no minimum funding requirement for contributions relating to future service, the economic benefit available as a reduction in future contributions is the future service cost to the entity for each period over the shorter of the expected life of the plan and the expected life of the entity. The future service cost to the entity excludes amounts that will be borne by employees.

    17. An entity shall determine the future service costs using assumptions consistent with those used to determine the defined 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 pl an is amended and shall assume a stable workforce in the future unless the entity is demonstrably committed at the end of the reporting period to make 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 the future service, the economic benefit available as a reduction in future contributions is the sum of:

    (a) any amount that reduces future minimum funding requirement contributions for future service because the entity made a prepayment (ie paid the amount before being required to do so); and
    (b) the estimated future service cost in each period in accordance with paragraphs 16 and 17 less the estimated minimum funding requirement contributions that would be required for future service in those periods if there were no prepayment as described in (a).

    21. An entity shall estimate the future minimum funding requirement contributions for future service taking into account the effect of any existing surplus determined using the minimum funding basis but excluding the prepayment described in paragraph 20(a). An entity shall use assumptions consistent with the minimum funding basis and, for any factors not specified by that basis, assumptions consistent with those used to determine the defined benefit obligation and with the situation that exists at the end of the reporting period as determined by Ind AS 19 . The estimate shall include any changes expected as a result of the entity paying the minimum contributions when they are due. However, the estimate shall not include the effect of expected changes in the terms and conditions of the minimum funding basis that are not substantively enacted or contractually agreed at the end of the reporting period.

    22. When an entity determines the amount described in paragraph 20(b), if the future minimum funding requirement contributions for future service exceed the future Ind AS 19 service cost in any given period, that excess reduces the amount of the economic benefit available as a reduction in future contributions. However, the amount described in paragraph 20(b) can never be less than zero.

    When a minimum funding requirement may give rise to a liability

    23. If an entity has an obligation under a minimum funding requirement to pay contributions to cover an existing shortfall on the minimum funding basis in respect of services already received, the entity shall determine whether the contributions payable will be available as a refund or reduction in future contributions after they are paid into the plan.

    24. To the extent that the contributions payable will not be available after they are paid into the plan, the entity shall recognise a liability when the obligation arises. The liability shall reduce the defined benefit asset or increase the defined benefit liability so that no gain or loss is expected to result from applying paragraph 58 of Ind AS 19 when the contributions are paid.

    25. An entity shall apply paragraph 58A of Ind AS 19 before determining the liability in accordance with paragraph 24.

    26. The liability in respect of the minimum funding requirement and any subsequent remeasurement of that liability shall be recognised immediately in other comprehensive income.


  5. #45
    IND-AS
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    Thumbs up Illustrative examples of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Illustrative examples of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Illustrative examples

    These examples accompany, but are not part of, Appendix A.

    Example 1—Effect of the minimum funding requirement when there is an Ind AS 19 surplus and the minimum funding contributions payable are fully refundable to the entity


    For Full Detail You can download this from PDF Format



    Attached Files Attached Files

  6. #46
    IND-AS
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    Thumbs up Appendix - B of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Appendix - B of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Appendix - B


    Illustrative example

    The appendix accompanies, but is not part of, Ind AS 19.

    Extracts from statements of profit and loss and balance sheets are provided to show the effects of the transactions described below. These extracts do not necessarily conform with all the disclosure and presentation requirements of other Standards.


    For Full Detail You can download this from PDF Format

    Attached Files Attached Files

  7. #47
    IND-AS
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    Thumbs up Appendix - C of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Appendix - C of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Appendix - C


    Illustrative disclosures

    This appendix accompanies, but is not part of, I nd AS 19. Extracts from notes show how the required disclosures may be aggregated in the case of a large multi -national group that provides a variety of employee benefits. These extracts do not necessarily conform with all the disclosure and presentation requirements of Ind AS 19 and other Standards. In particular, they do not illustrate the disclosure of:

    (a) accounting policies for employee benefits (see Ind AS 1 Presentation of Financial Statements). Paragraph 120A(a) of the Standard requires this disclosure to include the entity’s accounting policy for recognising actuarial gains and losses.
    (b) a general description of the type of plan (paragraph 120A(b)).
    (c) amounts recognised in other comprehensive income (paragraph 120A (i))
    (d) a narrative description of the basis used to determine the overall expected rate of return on assets (paragraph 120A(l)).
    (e) employee benefits granted to directors and key management personnel (see Ind AS 24 Related Party Disclosures).
    (f) share-based employee benefits (see Ind AS 102 Share-based Payment ).


    For Full Detail You can download this from PDF Format


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  8. #48
    IND-AS
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    Thumbs up Appendix - D of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Appendix - D of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Appendix - D


    Illustration of the application of paragraph 58A

    The appendix accompanies, but is not part of, I nd AS 19.Throughout this Appendix, the term ‘past service cost’ means non -vested past service cost to be amortised in accordance with paragraph 96 of Ind AS 19.

    The issue

    Paragraph 58 of the Standard imposes a ceiling on the defined benefit asset that can be recognised.

    58. The amount determined under paragraph 54 may be negative (an asset). An entity shall measure the resulting asset at the lower of:

    (a) the amount determined under paragraph 54 [ie the surplus/deficit in the plan plus (minus) any unrecognised past service cost]; and

    (b) the total of:

    (i) any cumulative unrecognised past service cost (see paragraph 96); and
    (ii) the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. The present value of these economic benefits shall be determined using the discount rate specified in paragraph 78.


    For Full Detail You can download this from PDF Format


    Attached Files Attached Files

  9. #49
    IND-AS
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    Thumbs up Appendix - E of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) - Employee Benefits

    Appendix - E of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Appendix - E


    References to matters contained in other Accounting Standards

    This Appendix is an integral part of Ind AS 19.

    This appendix lists the appendices which are part of other Indian Accounting Standards and makes reference to Ind AS 19, Employee Benefits

    1. Appendix A.Consolidation- Special Purpose Entities contained in Ind AS 27, Consolidated and Separate Financial Statements.


  10. #50
    IND-AS
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    Thumbs up Appendix - 1 of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15) -

    Appendix - 1 of Indian Accounting Standard (Ind AS) 19 - Earlier Accounting standard (15)

    Employee Benefits


    Appendix - 1

    Note: This Appendix is not a part of the Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 19 and the corresponding International Accounting Standard (IAS) 19, Employee Benefits.

    Comparison with IAS 19, Employee Benefits

    1. IAS 19 permits various options for treatment of actuarial gains and losses for post-employment defined benefit plans whereas Ind AS 19 requires recognition of the same in other comprehensive income, both for post -employment defined benefit plans and other long-term employment benefit plans. The actuarial gains recognised in other comprehensive income should be recognised immediately in retained earnings and should not be reclassified to profit or loss in a subsequent period. Changes consequent to the aforesaid have been made in the other paragraphs. Further,the following paragraphs of IAS 19 which are with reference to the options for the treatment of actuarial gains or losses for post-employment options have been deleted in Ind AS 19. In order to maintain consistency with paragraph numbers of IAS 19, the paragraph numbers are retained in Ind AS 19:

    (i) Paragraph 54(b)
    (ii) Paragraph 58A (b)
    (iii) Paragraph 61 (d)
    (iv) Paragraph 61 (g)
    (v) Paragraph 93
    (vi) Paragraph 93A
    (vii) Paragraph 95
    (vii) Paragraph 108 (c)
    (viii) Paragraph 120A (f) (i)
    (ix) Paragraph 120A (f) (v)
    (x) Paragraph 120A (f) (viii)
    (xi) Paragraph 127 (a)
    (xii) Paragraph 129(d)
    (xiii) Paragraph 58A (b) in ‘The Issue’ contained in Appendix D
    (xiv) Example 3 contained in Appendix D

    2. The transitional provisions given in IAS 19 have not been given in Ind AS 19, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First -time Adoption of Indian Accounting Standards corresponding to IFRS 1, First -time Adoption of International Financial Reporting Standards.

    3. The Ind AS 19 unlike IAS 19 gives guidance that detailed actuarial valuation of defined benefit obligations may be made at intervals not exceeding three years.

    4. 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 be used only where there is no deep market of high quality corporate bonds.

    5. Different terminology is used in this standard, e.g., the term ‘balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of profit and loss’ is used instead of ‘Statement of comprehensive income’. The words ‘approval of the financial statements for issue have been used instead of ‘authorisation of the financial statements for issue ’ in the context of financial statements considered for the purpose of events after the reporting period.

    6. Paragraph number 35 appears as ‘Deleted ‘in IAS 19. In order to maintain consistency with paragraph numbers of IAS 19, the paragraph number is retained in Ind AS 19.


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