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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Kaveri Pharma Ltd provides a monthly allowance that employees expect to receive within twelve months after the reporting period, so it is classified as a short-term employee benefit. Because of a temporary delay in cash availability, management expects to settle one year's allowance a few months beyond twelve months. Management expects that normal timing will resume next year. What is the correct approach under Ind AS 19?

Kaveri Pharma need not reclassify the allowance. Ind AS 19 states that a short-term employee benefit stays classified as such when expectations about the timing of settlement change only temporarily. Reclassification is considered only when the benefit's characteristics change or the timing change is not temporary.

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

Explanation

Ind AS 19 says 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 of the benefit change or the change in timing is not temporary. Here the delay is temporary, so no reclassification is needed.

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