CHAPTER 19: OTHER EMPLOYEE BENEFITS
Short-term Employee Benefits Any short-term benefits paid in advance
o Shall be recognizes as a prepayment
Are employee benefits other than termination
To the extent, that it will lead
benefits
to a reduction in future
o Which are expected to be settled
payments or a cash refund
wholly within 12 months after the end
The cost of short-term benefits
of the annual reporting period
o Shall be recognized as expense
In which the employees
In the period when the
render the related service
economic benefit is given
Includes the following
Except:
o Salaries, wages and social security
o When such
contributions
cost may be
o Short-term compensated or paid
included
absences
within the
Such as
cost of an
Paid annual leave
asset
Paid sick leave
Profit sharing and bonuses payable within 12 Short-term compensated or paid absences
months
An entity may pay employees for absences for
Nonmonetary benefits
various reasons
o Such as
o Such as
Medical care
Vacation
Housing
Sickness
Car
Short-term disability
Free or subsidized goods
Maternity or paternity
Recognition and Measurement Military service
Entitlement to paid absences falls into two
Accounting for short-term employee benefits
categories:
o Fairly straightforward
o Accumulating absences
Because there are no
o Non-accumulating absences
actuarial assumptions
Accumulating paid absences
No requirement to discount future benefits
o Are those that are carried forward
o Because such benefits are all payable
o Can be used in future periods
no later than 12 months
If the current period’s
After the end of the current
entitlement is not used in full
reporting period
o May be either
No possibility of actuarial gain or loss
Vesting
o Because short-term employee
Employees are
benefits are measured on an
entitled to a cash
undiscounted basis
payment for unused
Accounting Procedures entitlement on
(The rules for short-term employee benefits are essentially leaving the entity
an application of basic accounting principles and practice) Nonvesting
Employees are not
Unpaid short-term employee benefits at the
entitled to a cash
end of the accounting period
payment for unused
o Shall be recognized as accrued
entitlement on
expense
leaving the entity
Non-accumulating paid absences
o Those that are not carried forward
o Such benefits lapse if the current Other Long-term Employee Benefits
period’s entitlement is not used
Residual definition
Do not entitle the employees
All employee benefits other than short-term
to a cash payment for unused
employee benefits, postemployment and
entitlement on leaving the
termination benefits
entity
Not expected to be settled wholly within
o This is commonly the case for
twelve months after the end of annual
Sick pay
reporting period
Maternity or paternity leave
o In which the employees render the
Paid absences for military
related service
service
Examples of other long-term employee benefits
Profit-sharing and bonus plans
Long-term paid absences
Under some profit sharing plans
o Such as
o Employees shall receive a share of the
Long service
profit
Sabbatical leave
Only if they remain with the
Jubilee or other long service benefit
entity for a specified period
o Such plans create a constructive Long-term disability benefit
obligation Profit sharing and bonuses
As employees render service Deferred compensation
that increases the amount to Recognition and Measurement
be paid
If they remain in The recognition and measurement for other
service until the end long-term employee benefits
of the specified o Are the same as the recognition and
period measurement of defined benefit
o The measurement of such obligation
constructive obligation Liability recognized for other long-term
Reflects the possibility that employee benefits
some employees may leave o Is equal to the excess of PV of the
without receiving profit- liability over the FV of the plan assets
sharing payments At the end of the reporting
period
Recognition and Measurement Difference
(PAS 19 provides that an entity shall recognize the expected
o Recognition of the components of the
cost of profit-sharing and bonus payment when ALL of the
defined benefit cost
following conditions are present)
For other long-term employee benefits
The entity has a present legal or constructive o All of the following components of
obligation defined benefit cost are recognized in
o To make such payment as a result of profit or loss
past event Included in the computation
A reliable estimate of the obligation can be of employee benefit expense
made Current service cost
Past service cost
A present obligation exists when the entity has no
Any gain or loss on
realistic alternative but to make the payment.
settlement
Any difference between the estimated liability Net interest expense
and actual payment or net interest income
o Accounted for as change in Remeasurements
accounting estimate For defined benefit obligation
Included in profit or loss these are included in the OCI
Termination Benefits Recognition of termination benefits
Are employee benefits provided in exchange An entity shall recognize an expense and a
for the termination of an employee’s liability for termination benefits at the earlier
employment of the following dates:
o As a result of either o When the entity can no longer
An entity’s decision to withdraw the offer of the termination
terminate an employee’s benefits
employment before the When the plan is already
normal retirement date communicated or announced
An employee’s decision to to the affected employee
accept an offer of benefits in o When the entity recognizes the cost
exchange for the termination of restructuring
of employment That involves the payment of
The event that gives rise to the obligation termination benefits
o Termination of Employment Implicit in the recognition criteria
Rather than employee service o There needs to be an offer of
Unrelated for future employee service termination that binds the entity in
Do not include: some way
o Employee benefits resulting from Offer of termination
termination of employment at the o Is the action or activity deemed to
request of the employee give rise to the termination liability
Without an entity offer Termination costs that are part of a
o As a result of mandatory retirement restructuring place
These are postemployment o Are recognized at the same time as
benefits the recognition of other restructuring
Usually lump sum payments but sometimes costs
include Restructuring costs
o Enhancement of postemployment o Expenditures that are necessarily
benefits incurred for the restructuring
Either directly or indirectly Not associated with ongoing
Through an employee activities of the entity
benefit plan o Examples:
o Salary until the end of a specified Salaries and benefits of
period employees to be incurred
If the employee renders no after operation cease
further service
Measurement of termination benefits
That provides
economic benefits to If the termination benefits are expected to be
the entity settled wholly within 12 months after the end of
the reporting period
Fundamental Principles of Termination benefit o In which the termination benefit is
recognized
Not conditional on future service being
The requirements for short-term
provided benefit shall be applied.
Short period between offer of termination and Termination benefits are
actual termination measures at the undiscounted
amount
If the termination benefits are not expected to be
settled wholly within 12 months after the end of
the reporting period
o The requirements for long-term benefit
shall be applied.
o Measured at the discounted amount
