Employee benefits Flashcards
employee benefits
all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment
categories employee benefits
- short-term employee benefits (payable within 12 months)
- post-employment benefits (payable after completion of employment)
- other long-term employee benefits (not payable within 12 months after rendering services)
- termination benefits
post-employment benefits
formal or informal arrangements under which an entity provides post-employment benefits for one or more employees (retirement benefits, life insurance etc.)
Defined contribution plans
entity pays a fixed contribution into a separate entity => risk falls upon the employee
Defined benefit plans
employer obliged to provide agreed level of post-employment benefits
=> risk falls upon the employer
actuarial risk
risk of cost of providing benefits (assurance)
investment risk
risk that assets will be insufficient to pay required benefits
accounting for defined contribution post-employment plans
- if payment > expense then asset
- if payment < expense then liability
amounts to be recognized in profit/loss
- current service cost
- past service cost
- net interest
amounts to be recognized in other comprehensive income
- actuarial gains and losses
- excess return on plan assets
how should we account for short-term employee benefits
should be expensed when incurred. Liability may arise when benefits are accumulating across account periods
accumulating and vesting
liability recorded at each reporting date
accumulating but non-vesting
liability only recognized for the portion that is expected to result in additional payment to employees