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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Kaveri Engineering Ltd offers a long-service award payable to employees completing 25 years of service. It is an other long-term employee benefit. At year end, actuarial assumptions changed and the obligation increased by Rs 12 lakh, while service cost for the year was Rs 30 lakh and net interest cost was Rs 6 lakh. How should the Rs 12 lakh remeasurement be treated under Ind AS 19?

The Rs 12 lakh remeasurement goes to profit or loss. Ind AS 19 prescribes a simplified method for other long-term employee benefits under which remeasurements are not recognised in other comprehensive income. The total profit or loss charge is therefore Rs 48 lakh, being 30 plus 6 plus 12.

  1. ARecognised in other comprehensive income and never reclassified to profit or loss
  2. BRecognised in profit or loss, because for other long-term benefits remeasurements are not recognised in OCICorrect
  3. CDeferred and amortised over the average remaining service life of employees
  4. DRecognised directly in retained earnings

Explanation

Ind AS 19 states that the simplified method for other long-term employee benefits does not recognise remeasurements in OCI. So the Rs 12 lakh is recognised in profit or loss along with service cost and net interest, giving a total charge of Rs 48 lakh. Treating it as OCI is the post-employment treatment and is wrong here.

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