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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Himalaya Pharma Ltd had a non-accumulating compensated absence benefit earlier. In the current year it amends the policy so that unused leave now carries forward to future periods and can be used or encashed later. Employees' entitlements now accumulate. What must the entity consider under Ind AS 19 regarding classification?

The entity must consider whether the benefit still meets the definition of a short-term employee benefit. Ind AS 19 specifically gives a change from non-accumulating to accumulating as an example of a change in characteristics that requires this reassessment, rather than leaving classification fixed.

  1. ANothing, since classification is fixed at the date the benefit is first granted
  2. BWhether the benefit, now that its characteristics have changed from non-accumulating to accumulating, still meets the definition of a short-term employee benefitCorrect
  3. CAutomatically classify it as a defined benefit post-employment plan
  4. DRecognise the change as a change in accounting estimate with no reassessment of classification

Explanation

The standard states that if the characteristics of the benefit change, such as a change from non-accumulating to accumulating, the entity considers whether the benefit still meets the definition of short-term employee benefits. Option A ignores this requirement. Option C is wrong because accumulating leave is not automatically post-employment.

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