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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Himalaya Foods Ltd pays an annual performance bonus that employees receive within a few months of year end. In the current year, a delay in board approval means one year's bonus will be settled about 15 months after the reporting date, and management confirms this delay is purely temporary, with normal timing expected from next year. What is the correct approach under Ind AS 19?

Himalaya Foods need not reclassify the bonus. Paragraph 10 of Ind AS 19 says a short-term employee benefit stays classified as such when the expectation of settlement timing changes only temporarily. Reclassification is considered only when the benefit's characteristics change or the timing change is not temporary.

  1. AReclassify the bonus as an other long-term employee benefit permanently
  2. BReclassify it as a post-employment benefit for this year
  3. CNeed not reclassify it, since the change in expectation of timing of settlement is temporaryCorrect
  4. DReclassify it as a termination benefit and measure it at present value

Explanation

Ind AS 19 paragraph 10 states an entity need not reclassify a short-term employee benefit if its expectations of settlement timing change temporarily. Reclassification is considered only if the characteristics change or the timing change is not temporary. Here management confirms the delay is temporary, so the permanent reclassification option is wrong.

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