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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Himalaya Foods Ltd provides a paid annual leave benefit that employees must use within 12 months after the period in which it is earned, so it was classified as a short-term employee benefit. Management expects employees to use the leave within the period, but because of a temporary factory shutdown, settlement of some leave in the current year is delayed by a few months. Management still expects the delay to be temporary. What is the correct treatment under Ind AS 19?

No reclassification is required. Ind AS 19 says an entity need not reclassify a short-term employee benefit when its expectations about settlement timing change only temporarily. It must reconsider classification only if the benefit's characteristics change or the timing change is not temporary.

  1. AReclassify the benefit as an other long-term employee benefit immediately
  2. BReclassify the benefit as a post-employment benefit
  3. CAccount for the benefit on a cash basis from now onwards
  4. DNo reclassification is needed, since the change in expectation of settlement timing is only temporaryCorrect

Explanation

Ind AS 19 states that an entity need not reclassify a short-term employee benefit if its expectations of the timing of settlement change temporarily. Reassessment is required only if the characteristics of the benefit change or the change in expectation is not temporary. Option A is wrong because the change is temporary.

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