International Financial Reporting Standards_guide.pdf

Chapter 25 Employee Benefits (IAS 19) 277
service cost may be either positive (where benefits are introduced or improved) or negative
(where existing benefits are reduced).
25.3.14 Termination benefits are payable as a result of either an entity’s decision to terminate
an employee’s employment before the normal retirement date or the employee’s decision
to accept voluntary redundancy in exchange for those benefits.
25.3.15 Other long-term employee benefits are employee benefits (other than postemployment
benefits and termination benefits) which do not fall due wholly within the
12 months after the end of the period in which the employees render the related service.
25.4 ACCOUNTING TREATMENT
Recognition
25.4.1 Short-term employment benefits. These include wages; salaries; short-term compensated
absences; profit sharing or bonuses payable within 12 months; and nonmonetary
benefits, for example medical benefits, for current employees. When the employee has rendered
the service to an entity during an accounting period the entity must recognize the
undiscounted amount of short-term employee benefits expected to be paid in exchange for
that service as an expense. A liability should be recognized to the extent that these benefits
have not been paid in cash.
25.4.2 Other long-term employee benefits. These include long-term compensated absences,
long service benefits, long-term disability benefits, bonuses or profit sharing payable after 12
months, and deferred compensation. IAS 19 requires the projected unit credit method to be
applied to the measurement of other long-term benefits, as for defined benefit plans.
However, a long-term benefit is not subject to the same degree of estimation uncertainty as a
defined benefit retirement plan. Therefore, simplified rules for actuarial gains or losses and
past service costs are applicable. In terms of these simplified rules all actuarial gains and
losses and past service costs are recognized immediately.
25.4.3 Termination benefits. When the event that results in an obligation is termination
rather than employee service, an entity should recognize the benefits due only when it is
demonstrably committed through a detailed formal plan to either:
■ terminate the employment of an employee or group of employees before the normal retirement
date; or
■ provide termination benefits to encourage voluntary redundancy.
Termination benefits falling due more than 12 months after the reporting date should be
discounted.
25.4.4 Postemployment benefits—defined contribution plans. An entity recognizes contributions
to a defined contribution plan as an expense when an employee has rendered
services in exchange for those contributions. When the contributions do not fall due within
12 months after the accounting period that services were rendered, they should be
discounted. To the extent that contributions have not been paid a liability should be
recognized.
25.4.5 Postemployment benefits—defined benefit plans. The following rules are applicable
to the accounting for defined benefit plans:
■ An entity should use the projected unit credit method to measure the present value of
its defined benefit obligations and related current- and past-service costs. This method