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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Kaveri Pharma Ltd gives employees a monthly transport allowance and a paid annual leave benefit, all expected to be settled within twelve months after the period in which services are rendered. In the current year, because of a temporary cash shortage, management expects to settle the benefit later than twelve months for one reporting period only; the expectation reverts to normal thereafter. How should the entity treat the benefit under Ind AS 19?

The entity need not reclassify the benefit as the change in expectation of settlement timing is temporary. Ind AS 19 requires reconsideration of short-term classification only when the benefit's characteristics change or the change in settlement expectation is not temporary.

  1. AReclassify it immediately as an other long-term employee benefit and remeasure it
  2. BReclassify it as a post-employment benefit because settlement is delayed
  3. CNeed not reclassify it, because the change in expectation of timing of settlement is only temporaryCorrect
  4. DReclassify it as a termination benefit since settlement is delayed

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. Reclassification is considered only if the characteristics change or the change in timing expectation is not temporary. Option A would be right only for a non-temporary change.

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