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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Kaveri Pharma Ltd provides a long-service award to employees who complete 15 years of service, payable after 15 years. The award is classified as an other long-term employee benefit. At the year end, the actuarial valuation shows an actuarial gain of Rs 4 lakh on the obligation. How should Kaveri Pharma treat this gain under Ind AS 19?

The Rs 4 lakh actuarial gain is recognised in profit or loss. Ind AS 19 uses a simplified method for other long-term employee benefits, and unlike post-employment benefits, this method does not recognise remeasurements in other comprehensive income. Therefore no OCI recognition or deferral applies to the long-service award.

  1. ARecognise it in other comprehensive income and never reclassify it to profit or loss
  2. BRecognise it in other comprehensive income and later reclassify it to profit or loss
  3. CRecognise it in profit or loss, as the simplified method does not recognise remeasurements in other comprehensive incomeCorrect
  4. DDefer it and amortise it over the remaining service lives of the employees

Explanation

Ind AS 19 requires a simplified method for other long-term employee benefits. Unlike post-employment benefits, this method does not recognise remeasurements in other comprehensive income, so the gain goes to profit or loss. The first option describes the treatment of post-employment benefit remeasurements, which is wrong here.

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