Corporate Accounting and Auditing · Employee Benefits (Ind AS 19)

Termination Benefits and Other Long-term Benefits under Ind AS 19

Updated 10 October 2026 · Fact-checked

Other long-term employee benefits (such as long-service leave or jubilee awards) are measured like a defined benefit plan, but all changes, including remeasurements, go to profit or loss, not OCI. Termination benefits follow the nature of the benefit: short-term rules if settled within twelve months of year-end, otherwise long-term rules.

Understand Other Long-term Benefits and Termination Benefits

Ind AS 19 groups employee benefits into four types: short-term benefits, post-employment benefits, other long-term employee benefits and termination benefits. This topic covers the last two. The key skill is classifying the benefit first. The classification decides the accounting.

Other long-term employee benefits are benefits not expected to be settled wholly before twelve months after the end of the annual reporting period in which employees render the related service. Examples in the standard are long-term paid absences such as long-service or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits, profit-sharing and bonuses, and deferred remuneration.

The standard says their measurement is not usually subject to the same uncertainty as post-employment benefits, so it requires a simplified method. The simplification is only about remeasurements. You still calculate service cost and net interest on the net defined benefit liability (asset). But you recognise the net total of service cost, net interest and remeasurements in profit or loss, unless another Ind AS requires or permits including them in the cost of an asset. Nothing goes to other comprehensive income.

Termination benefits arise when an employee's employment ends at the entity's offer, for example a voluntary retirement scheme or a retrenchment package. They are not the same as benefits paid because the employee resigns without an offer, or because of mandatory retirement. The standard treats those as post-employment benefits. Where an entity pays a lower benefit on resignation and a higher one at its own request, only the difference is a termination benefit.

Benefits paid whatever the reason for leaving (for example gratuity-type payments) are certain to be paid, only the timing is uncertain. These are post-employment benefits, not termination benefits.

Measurement of termination benefits depends on the nature of the benefit. If the benefit enhances a post-employment benefit, apply the post-employment rules. Otherwise, if wholly settled before twelve months after the end of the annual reporting period in which the termination benefit is recognised, apply the short-term rules. If not, apply the other long-term benefit rules.

Key rules to remember

Other long-term benefits: amount in profit or loss: Service cost + Net interest on net defined benefit liability (asset) + Remeasurements; Net total goes to profit or loss (para 156), unless another Ind AS permits inclusion in the cost of an asset. No OCI.
Net defined benefit liability (asset) for long-term benefits: Present value of obligation − Fair value of plan assets (if any); Use this balance to compute net interest and the closing liability.
Termination benefit, resignation vs entity request: Termination benefit = Benefit on entity's request − Lower benefit on employee's request; Only the excess is a termination benefit (para 160); the lower amount is post-employment.
Termination benefit measurement rule: Enhancement to post-employment → post-employment rules; else settled wholly within 12 months after year-end → short-term rules; otherwise → other long-term rules; Para 169. The 12 months run from the end of the annual reporting period in which the benefit is recognised.
Classification test for other long-term benefits: Not expected to be settled wholly before 12 months after the end of the period in which service is rendered; Para 153. If it is expected to be settled sooner, it is short-term.

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

Use this method for any question on classification, recognition or disclosure of these benefits.

1Identify the benefit and who triggered it: the employee's choice, mandatory retirement, or the entity's offer.
2Classify it: short-term, post-employment, other long-term or termination. Check the twelve-month settlement test.
3If it is a termination benefit, apply para 169: enhancement to post-employment, short-term, or other long-term treatment.
4For other long-term benefits, compute the present value of the obligation and subtract plan assets, if any.
5Work out service cost, net interest (discount rate × opening net liability, adjusted for time-weighted movements) and remeasurements.
6Add all three and charge the net total to profit or loss. Do not take remeasurements to OCI.
7Pass the journal entry and show the closing liability.
8Add the disclosure points asked for, and state the paragraph logic in one line.

Quickest way: Classify first, then follow the label

When to use it: Use in MCQs and short theory questions where you must pick the correct treatment quickly.

Ask: did the employee leave at the entity's offer? If no, it is post-employment, not termination.
Ask: settled within twelve months after year-end? If yes, short-term rules; if no, long-term rules.
For long-term benefits remember: same method as defined benefit, but everything to profit or loss.
For a resignation vs entity-request gap, only the extra amount is the termination benefit.

Common mistakes in Other Long-term Benefits and Termination Benefits

Taking remeasurements of other long-term benefits to OCI.
Students copy the defined benefit plan treatment for post-employment benefits.
Fix: For other long-term benefits, service cost, net interest and remeasurements all go to profit or loss. Para 154 says remeasurements are not recognised in OCI.
Treating voluntary resignation or mandatory retirement payments as termination benefits.
The word 'termination' sounds like any exit.
Fix: Termination benefits arise from the entity's offer. Benefits on employee-requested exit without an offer, or mandatory retirement, are post-employment benefits.
Treating the whole VRS payout as termination benefit when a lower resignation benefit already exists.
Students ignore para 160.
Fix: Only the excess of the entity-requested benefit over the resignation benefit is a termination benefit.
Skipping the twelve-month test for termination benefits.
Students assume all termination payments are expensed at once.
Fix: If not wholly settled within twelve months after the reporting period end, apply other long-term benefit rules, which involve discounting.
Treating profit-sharing and bonuses as always short-term.
Bonus is usually paid within the year.
Fix: They are other long-term benefits when not expected to be settled wholly within twelve months after the end of the period of service.
Calling gratuity paid on any exit a termination benefit.
Some jurisdictions call it a termination indemnity.
Fix: Benefits payable regardless of the reason for leaving are certain in amount but uncertain in timing, so they are post-employment benefits (para 164).

Worked examples

Example 1

Sunrise Textiles Ltd gives a long-service award to employees completing 10 years. At 1 April 2026 the present value of the obligation was ₹8,00,000, there are no plan assets and the discount rate is 10%. For 2026-27 the current service cost is ₹1,20,000 and actuarial loss on remeasurement is ₹30,000. No awards were paid in the year. Show the expense and closing liability. Assume service cost arises at year-end and ignore the asset-capitalisation option.

Show the solution

Classify: a long-service award not settled within twelve months is an other long-term employee benefit.
Net interest = 10% × ₹8,00,000 = ₹80,000.
Service cost = ₹1,20,000.
Remeasurement (actuarial loss) = ₹30,000, recognised in profit or loss, not OCI.
Total charge to profit or loss = 1,20,000 + 80,000 + 30,000 = ₹2,30,000.
Closing liability = 8,00,000 + 2,30,000 = ₹10,30,000 as no payments were made.
Entry: Employee benefit expense A/c Dr. ₹2,30,000 to Provision for long-service awards A/c ₹2,30,000.

Answer: Profit or loss charge is ₹2,30,000 (service cost ₹1,20,000, interest ₹80,000, remeasurement ₹30,000). Closing liability is ₹10,30,000. Nothing goes to OCI.

Example 2

Kaveri Engineering Ltd offers a voluntary separation scheme in January 2027. Employees who accept get ₹6,00,000 each. Employees who simply resign get ₹2,50,000 each under existing policy. 20 employees accept the offer, and all payments will be made in May 2027. The reporting date is 31 March 2027. Identify the termination benefit and its treatment.

Show the solution

The ₹2,50,000 resignation benefit is payable on the employee's own request, so it is in substance a post-employment benefit.
The excess is the termination benefit: 6,00,000 − 2,50,000 = ₹3,50,000 per employee.
For 20 employees: 3,50,000 × 20 = ₹70,00,000.
Settlement in May 2027 is before twelve months after the end of the reporting period (31 March 2028), so short-term benefit rules apply (para 169(a)). Measure at undiscounted amount.
Total payable is 6,00,000 × 20 = ₹1,20,00,000, of which ₹70,00,000 is the termination component and ₹50,00,000 is post-employment.

Answer: The termination benefit is ₹3,50,000 per employee, ₹70,00,000 in total. Since it will be settled wholly within twelve months after the reporting period, short-term benefit requirements apply and no discounting is needed.

Exam tips

Always start theory answers with the classification of the benefit. Examiners give marks for it.
Write the one line: for other long-term benefits, remeasurements go to profit or loss, not OCI.
In numerical questions, show service cost, net interest and remeasurement as three separate lines before totalling.
For MCQs, test who initiated the exit and the twelve-month settlement period before choosing an option.
Where disclosure is asked, note that Ind AS 24 and Ind AS 37 may require related party, key management personnel and contingent liability information.

Practice questions from Employee Benefits (Ind AS 19)

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

What is the difference between termination benefits and post-employment benefits?

Termination benefits arise from the entity's offer to end employment. Benefits on employee-requested exit without an offer, on mandatory retirement, or payable whatever the reason for leaving are post-employment benefits.

Where do remeasurements of other long-term benefits go?

They go to profit or loss along with service cost and net interest. Ind AS 19 does not recognise them in other comprehensive income for these benefits.

Are profit-sharing and bonuses always short-term benefits?

No. They are short-term if expected to be settled wholly before twelve months after the end of the reporting period in which service is rendered. Otherwise they are other long-term employee benefits.

What disclosures link to this topic in other Ind ASs?

Where Ind AS 24 requires, disclose related party transactions with post-employment plans and post-employment benefits for key management personnel. Where Ind AS 37 requires, disclose contingent liabilities from post-employment benefit obligations.