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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Godavari Engineering Ltd has a gratuity plan, a post-employment defined benefit plan, and also a jubilee benefit, which is another long-term benefit. The CFO makes four statements on the discount rate and remeasurements. Which one is correct under Ind AS 19 for Indian rupee obligations?

The gratuity discount rate for rupee obligations is set by reference to market yields on government bonds, which differs from IAS 19's corporate bond approach. Remeasurements of the jubilee benefit, an other long-term benefit, are not taken to OCI under the simplified method and go to profit or loss.

  1. AThe discount rate for the gratuity obligation is based on market yields on high-quality corporate bonds only, as in IAS 19
  2. BThe discount rate for the gratuity obligation is determined by reference to market yields on government bonds, and remeasurements of the jubilee benefit go to profit or lossCorrect
  3. CRemeasurements of both the gratuity and the jubilee benefit go to other comprehensive income
  4. DThe discount rate depends on the expected return on plan assets, and jubilee remeasurements go to OCI

Explanation

Ind AS 19 requires the post-employment obligation discount rate to be based on government bond yields, unlike IAS 19, which uses corporate bonds where a deep market exists. For other long-term benefits such as the jubilee benefit, the simplified method does not recognise remeasurements in OCI, so they go to profit or loss. The corporate-bond option reflects IAS 19, not Ind AS 19.

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