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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Kaveri Pharma Ltd pays an annual performance bonus to staff that is normally settled within twelve months of the reporting period end. This year, because of a temporary cash-flow shortage, management expects to settle part of the bonus a few months later than usual, but still intends to restore normal timing next year. What is the correct approach under Ind AS 19?

Kaveri Pharma need not reclassify the bonus. Ind AS 19 states that a temporary change in expectations of settlement timing does not require a short-term employee benefit to be reclassified. Reclassification arises only if the benefit's characteristics change or the timing change is not temporary.

  1. AReclassify the bonus as a long-term employee benefit permanently from this year
  2. BReclassify it as a post-employment benefit
  3. CNot reclassify it, because a temporary change in expectations about the timing of settlement does not require reclassification of a short-term employee benefitCorrect
  4. DDerecognise the liability until settlement is certain

Explanation

The text says an entity need not reclassify a short-term benefit if its expectations of the timing of settlement change only temporarily. Reclassification is considered only if the benefit's characteristics change or the timing change is not temporary. Here the delay is temporary, so the benefit stays short-term.

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