Skip to content

ACCA Strategic Professional · Strategic Business Reporting (International) · Employee benefits

Kappa Co has a long-service award scheme. Employees who complete 10 years' service receive a cash bonus. At the year end Kappa remeasures the net liability for the scheme and the remeasurement gives an actuarial gain of $150,000. How does IAS 19 require this gain to be treated?

The $150,000 gain goes to profit or loss in full. For other long-term employee benefits such as long-service awards, IAS 19 requires remeasurements to be recognised in profit or loss rather than OCI, which is reserved for post-employment defined benefit plans. The corridor method no longer exists.

  1. ARecognise it in other comprehensive income and never reclassify it
  2. BRecognise it in profit or loss in fullCorrect
  3. CRecognise it in other comprehensive income and reclassify it to profit or loss on settlement
  4. DDefer it and amortise it using the corridor approach

Explanation

For other long-term employee benefits, IAS 19 requires service cost, net interest and remeasurements all to be recognised in profit or loss (unless included in an asset's cost). The OCI treatment applies only to post-employment defined benefit plans. The corridor approach was removed from IAS 19.

Did you get it right without looking?

One question tells you little. A timed set on Employee benefits shows your real accuracy, how long you take and where you lose marks.

Practise Employee benefitsFree diagnostic mock

More Employee benefits questions