Chapter 9 - Employee Benefits Flashcards
(16 cards)
Which standard covers employee benefits?
IAS 19
Which standard covers share-based payments?
IFRS 2
What is the objective of IAS 19?
To prescribe the accounting and disclosure of employee benefits.
Who should apply IAS 19?
Should be applied by all entities in accounting for the provision of employee benefits, except those in which IFRS 2 applies.
What are employee benefits under IAS 19?
All forms of consideration given by an enterprise in exchange for services rendered
What are examples of employee benefits under IAS 19?
- short-term benefits (wages, salaries, annual leave, bonuses, non-monetary benefits)
- post-employment benefits (excluding termination benefits, payable after the completion of employment - e.g. continued health and medical care)
- other long-term benefits - (e.g. disability benefits, paid sabbatical leave)
- termination benefits (e.g. payable on termination - e.g. voluntary redundancy).
What is the main principle of IAS 19?
That the cost of providing employee benefits should be recognised in the period in which the benefit is earned by the employee, rather than when paid or payable
What items are covered by IFRS 2?
Share plans and options plans, equity compensation plans
What are short-term employee benefits under IAS 19?
Employee benefits that are due to be settled within 12 months from the end of period in which the employees provide their services.
Includes wages, annual and sick leave, profit-sharing / bonuses and non-monetary benefits.
Entity should recognise a liability when it becomes payable, not when actually paid.
For compensated absences (e.g. annual vacation or paid sick leave), how are these recognised under IAS 19?
Depends if accumulating (e.g. annual leave) or non-accumulating (sick leave).
Accumulating, based on service, any unused entitlement at the end of the reporting period is recorded as a liability.
In the case of non-accumulating paid absences, when the absences occur.
When should an entity recognise an expense and corresponding liability under IAS 19?
When the entity:
(a) has a present legal or constructive obligation from a past event
(b) a reliable estimate of the obligation can be made.
For a post-employment benefit under IAS 19, how is the accounting treatment worked out?
Whether it is a defined contribution or defined benefit plan
What are defined contribution plans?
Payment into the plan are fixed, with payments out to members based on the size of the pot.
Risk of the plan lies with the members.
What are defined benefit plans?
Defined as all post-employment benefit plans other than defined contribution plans.
Typically, an employer retains an obligation to make up any shortfall in a plan, thereby bearing risk.
For defined contribution plans, how should these be recorded?
As an expense in the period which the employee provides its service.
Where unpaid at period end, a liability should be recorded.
If a defined contribution plan is expected to be paid more than 12 months later, how should these be recorded under IAS 19?
Should be discounted to reflect the time value of money.
