Strategic Business Reporting (International) · Employee benefits

Other Long-term Benefits and Termination Benefits under IAS 19

Updated 11 October 2026 · Fact-checked

Other long-term employee benefits (such as long-service leave) are accounted for like a defined benefit plan, but all remeasurements go to profit or loss. Termination benefits are recognised at the earlier of when the entity can no longer withdraw the offer and when it recognises related IAS 37 restructuring costs.

Understand Other Long-term Benefits and Termination Benefits

IAS 19 splits employee benefits into four groups: short-term, post-employment, other long-term and termination benefits. This topic covers the last two.

Other long-term employee benefits are benefits that are not short-term, post-employment or termination benefits. They are not wholly due within twelve months after the end of the period in which employees give the service. Examples are long-service leave, sabbaticals, jubilee awards, long-term disability benefits and bonuses or deferred compensation payable twelve months or more after the period in which they are earned.

The accounting is a simplified version of the defined benefit model. You measure the net liability as the present value of the obligation less the fair value of any plan assets. You use the projected unit credit method. The difference is that you do not split the change into parts. Service cost, net interest and remeasurements are all recognised in profit or loss. Nothing goes to other comprehensive income (OCI). Many such benefits are small and uncertain, so IAS 19 avoids the full complexity.

Termination benefits are paid because the entity ends employment before normal retirement, or because the employee accepts voluntary redundancy. The trigger is the termination, not service rendered. So there is no future service to spread the cost over. You recognise the liability and expense at the earlier of two dates: when the entity can no longer withdraw the offer of the benefits, and when the entity recognises costs for a restructuring within the scope of IAS 37 that includes termination benefits.

For an offer to employees to encourage voluntary redundancy, the entity can no longer withdraw it at the earlier of employee acceptance and the date a restriction (legal, contractual or other) takes effect. For involuntary terminations, it is when the entity has communicated a plan of termination to the affected employees, the plan meets set criteria and cannot be changed significantly. That is why restructuring matters: a constructive obligation under IAS 37 needs a detailed formal plan and a valid expectation in those affected. Termination benefits are measured at the best estimate. If they fall due more than twelve months after the reporting date, discount them.

Key rules to remember

Other long-term benefit liability: Net liability = PV of defined benefit obligation − fair value of plan assets; Use the projected unit credit method. Plan assets are rare for these benefits.
Charge for other long-term benefits: P&L = current service cost + net interest on net liability + remeasurements (+ past service cost, settlement gain or loss); All components go to profit or loss. No OCI element, unlike post-employment defined benefit plans.
Termination benefit recognition date: Recognise at the EARLIER of: (a) entity can no longer withdraw the offer; (b) entity recognises related IAS 37 restructuring costs; Voluntary: usually acceptance. Involuntary: plan communicated to affected employees and criteria met.
Termination benefit measurement: Best estimate of the cost; discount if due more than 12 months after the reporting date; If an offer encourages voluntary redundancy, measure on the number of employees expected to accept.
Termination benefits are not service-related: Benefits tied to future service are NOT termination benefits; If employees must work on until a leaving date, the benefit is a short-term or other long-term benefit. Spread the cost over the service period.

How to solve Other Long-term Benefits and Termination Benefits questions

Use this method for any scenario on long-term or termination benefits. Always apply it to the facts given.

1Classify the benefit. Ask what triggers it: service given, or the ending of employment. Also ask when it is due: within twelve months or later.
2If it is an other long-term benefit, measure the obligation with the projected unit credit method and deduct any plan assets.
3Put every movement (service cost, interest, remeasurements) in profit or loss. State clearly that none goes to OCI.
4If it is a termination benefit, find the date the entity can no longer withdraw the offer. Check whether the offer was voluntary or involuntary.
5Check for a linked restructuring. Under IAS 37 you need a detailed formal plan and a valid expectation in those affected, for example by starting to implement the plan or announcing it. Recognise at the earlier date.
6Measure at the best estimate, using expected take-up for voluntary offers. Discount if settlement is more than twelve months away.
7Check whether any pay is for future work. If so, spread it over the service period instead of expensing it now.
8Write the journal, state the amount and add the link to the scenario, such as ethics or earnings management if a provision looks too early or too large.

Quickest way: Trigger and date test

When to use it: Use it when a scenario gives dates and announcements and asks whether to accrue a redundancy cost.

Underline the trigger: service or termination.
If termination, list the dates: board decision, announcement, employee acceptance, leaving date.
Pick the earlier of the no-withdrawal date and the IAS 37 restructuring recognition date.
Compare that date to the reporting date. If it is before, accrue. If after, disclose only if relevant as an event after the period.
Write the amount and the journal: Dr Expense, Cr Liability.

Common mistakes in Other Long-term Benefits and Termination Benefits

Recognising termination benefits only when employees leave or are paid.
Students think of cash timing and treat the cost like a normal wage.
Fix: Recognise when the offer cannot be withdrawn or when the restructuring costs are recognised, whichever is earlier.
Putting remeasurements of long-term benefits into OCI.
Students copy the post-employment defined benefit treatment.
Fix: For other long-term benefits, all components, including remeasurements, go to profit or loss.
Recognising a restructuring provision because the board has decided to restructure.
Students ignore that IAS 37 needs a detailed formal plan and a valid expectation in those affected.
Fix: A board decision alone is not enough. Check that the plan has been announced or implementation has started before the year end.
Treating pay for work until a future closure date as a termination benefit.
The word redundancy in the scenario triggers the label.
Fix: If the employee must keep working to earn the payment, the cost is for service. Spread it over the period of service.
Forgetting to discount benefits due more than twelve months after the reporting date.
Students focus on the recognition date and skip the measurement rule.
Fix: Check the settlement date. If it is beyond twelve months, discount at the rate used for high-quality corporate bonds.
Including costs of retraining or relocating continuing staff in the termination cost.
All restructuring costs look similar in a scenario.
Fix: Termination benefits are only for ending employment. IAS 37 excludes costs of retraining or relocating continuing staff from a restructuring provision.

Worked examples

Example 1

Delta Co has a December year end. On 1 December 20X5 the board approved a plan to close a factory and make 200 employees redundant. On 20 December 20X5 the plan was announced to the affected employees with details of the payment of ₹3,00,000 each, and the plan could not be changed significantly. Employees leave on 31 March 20X6. Discuss and quantify the amount in the year ended 31 December 20X5. Ignore discounting.

Show the solution

Classify: payment arises from ending employment, not service, so it is a termination benefit.
Dates: board approval on 1 December is not enough. The plan was communicated on 20 December with the criteria met and the plan unlikely to change.
This is also when the IAS 37 restructuring provision is recognised, because there is a detailed formal plan and a valid expectation in those affected.
The earlier of the two dates is 20 December 20X5, which is before the year end, so recognise in 20X5.
Amount: 200 × ₹3,00,000 = ₹6,00,00,000.
Journal: Dr Profit or loss ₹6,00,00,000, Cr Liability (provision) ₹6,00,00,000. The leaving date of 31 March 20X6 only affects cash timing, not recognition.

Answer: Recognise a termination benefit expense and liability of ₹6,00,00,000 at 31 December 20X5, because the plan was communicated on 20 December 20X5.

Example 2

Echo Co gives employees a long-service award on completing 10 years. At 1 January 20X6 the net liability for the award was $400,000. For 20X6 the current service cost is $60,000, the discount rate is 5%, and actuarial remeasurement at year end gives a loss of $25,000. No benefits are paid and there are no plan assets. Calculate the closing liability and the charge to profit or loss, and state where the remeasurement goes.

Show the solution

Classify: a long-service award is an other long-term employee benefit, so the simplified model applies.
Net interest = 5% × $400,000 = $20,000.
Current service cost = $60,000.
Remeasurement loss = $25,000, recognised in profit or loss, not OCI.
Total profit or loss charge = 60,000 + 20,000 + 25,000 = $105,000.
Closing liability = 400,000 + 105,000 = $505,000.

Answer: The profit or loss charge is $105,000, including the $25,000 remeasurement loss, and the closing liability is $505,000. No amount goes to OCI.

Exam tips

Always state the classification first. Marks usually go to correctly naming the benefit type before you calculate.
In restructuring scenarios, write both dates and say which is earlier. Examiners reward the explicit comparison.
Say clearly that other long-term benefit remeasurements go to profit or loss, and contrast with defined benefit post-employment plans.
Link to ethics when a scenario hints that a large redundancy provision is booked early to smooth profits. This earns professional skills marks for scepticism and commercial acumen.
Address the stakeholder or reader named in the requirement, such as a finance director, and keep your tone suitable for that audience.

Practice questions from Employee benefits

Other Long-term Benefits and Termination Benefits in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Other Long-term Benefits and Termination Benefits: frequently asked questions

When do you recognise termination benefits under IAS 19?

Recognise them at the earlier of two dates. One is when the entity can no longer withdraw the offer. The other is when it recognises restructuring costs under IAS 37 that include termination benefits.

How are other long-term employee benefits different from defined benefit pensions?

The measurement is similar, using the projected unit credit method. The difference is presentation. For other long-term benefits, all remeasurements go to profit or loss, while for post-employment plans they go to OCI.

How does IAS 37 affect termination benefits?

If termination benefits arise within a restructuring, IAS 37 conditions on a detailed formal plan and a valid expectation in those affected decide when the restructuring cost is recognised. IAS 19 still governs the termination benefit itself, and you use the earlier date.

Do I discount termination benefits?

Only if they fall due more than twelve months after the reporting period ends. In that case you discount them using the rate for high-quality corporate bonds. Otherwise you measure them at the best estimate of the cost.