Ind AS 19: Presentation, Disclosure and Differences from IAS 19

Understand Presentation, Disclosure and Differences from IAS 19

Key rules to remember

Offsetting condition

Offset only if: (legal right to use surplus of one plan to settle another) AND (intention to settle net OR realise surplus and settle obligation simultaneously)

Both parts are needed. If either fails, present the asset and the liability separately.

Discount rate under Ind AS 19

Discount rate = market yield on government bonds at the reporting date, matched to currency and estimated term of the obligations

This is the carve-out. IAS 19 uses high-quality corporate bond yields.

Present value of an obligation

PV = Benefit payable ÷ (1 + r)ⁿ

A higher discount rate gives a lower obligation. Use r from government bonds in Ind AS.

Net defined benefit liability (asset) reconciliation

Simplified: Net liability closing = Opening + Current service cost + Past service cost + Loss (– gain) on settlement + Net interest + Remeasurements (OCI) – Employer contributions, with the effect of the asset ceiling included where a net asset is limited (benefits paid from plan assets have no net effect)

This is a simplified view. Benefits paid reduce both the obligation and the plan assets, so the net figure is unchanged. The disclosure must reconcile opening to closing for each component (obligation, plan assets and asset ceiling effect), not only the net figure.

Classification rule

Current/non-current split follows Ind AS 1; Ind AS 19 does not prescribe it

Say this explicitly in theory answers.

How to solve Presentation, Disclosure and Differences from IAS 19 questions

1. 1Identify what is asked: offsetting, classification, disclosure list, or a comparison with IAS 19.
2. 2For offsetting, list each plan's surplus or deficit separately. Check for a legal right to use one plan's surplus for another.
3. 3If the right exists, check for the intention to settle net or simultaneously. If both are met, net the balances; otherwise show gross.
4. 4For classification, refer to Ind AS 1 and Schedule III. Show the portion due within twelve months as current and the rest as non-current.
5. 5For disclosure, structure the answer under: plan characteristics and risks, amounts in the financial statements, effect on future cash flows.
6. 6For IAS 19 differences, state the discount rate carve-out first: government bond yield instead of corporate bond yield. Then state the effect on the obligation.
7. 7If a discount rate is given in a scenario, use the government bond rate for Ind AS and compute the present value with it.
8. 8Write the conclusion in one line linking the rule to the scenario facts.

Quickest way: Two-test shortcut for offsetting and the discount rate

Common mistakes in Presentation, Disclosure and Differences from IAS 19

• Netting the surplus of one plan against the deficit of another automatically.

  Students treat the employer as one entity and assume totals can be combined.

  Fix: Check both conditions: a legal right to use the surplus and an intention to settle net or simultaneously. Without them, present gross.

• Using the corporate bond yield as the discount rate in an Ind AS 19 question.

  IAS 19 and many reference books are based on corporate bond yields.

  Fix: Under Ind AS 19, use the government bond yield matched to the term of the obligation. Mention this as the carve-out.

• Saying Ind AS 19 prescribes the current/non-current split.

  Students recall the split from Schedule III and assume the standard requires it.

  Fix: State that Ind AS 19 is silent and the classification follows Ind AS 1 and Schedule III.

• Listing disclosures only for the net liability and omitting reconciliations, sensitivity and plan asset classes.

  Students remember the balance sheet figure and forget the notes.

  Fix: Use the three objectives as headings, then add reconciliation, asset classes, actuarial assumptions, sensitivity analysis, expected contributions and duration.

• Showing remeasurements in profit or loss or recycling them later.

  Confusion with older treatment and with other items that are reclassified.

  Fix: Remeasurements of defined benefit plans go to other comprehensive income and are not reclassified to profit or loss.

• Claiming extensive Ind AS 19 disclosures are required for short-term benefits.

  Students over-apply the defined benefit disclosure list.

  Fix: Ind AS 19 has no specific disclosure requirement for short-term benefits. Other standards, for example Ind AS 24 for key management personnel, may require disclosure.

Worked examples