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CA Intermediate · Advanced Accounting · Applicability of Accounting Standards

Kiran Pharma Ltd, a Level II company, has a profit before tax of Rs 40 lakh. It wants to use the relaxation for Level II and Level III companies relating to AS 15 Employee Benefits. Which is correct?

Level II companies must still apply AS 15 but get relaxations: they can measure defined benefit obligations by a simpler reasonable method instead of the Projected Unit Credit Method and give fewer disclosures. They are not fully exempt from the standard.

  1. ALevel II companies need not apply AS 15 at all
  2. BLevel II companies may measure short-term and long-term benefits fully but must disclose nothing about defined benefit plans
  3. CLevel II companies may use a simplified approach: they need not use the Projected Unit Credit Method, but may use a simpler method such as estimating the liability on a reasonable basis, and have reduced disclosuresCorrect
  4. DLevel II companies must use the Projected Unit Credit Method and full disclosures like Level I

Explanation

AS 15 applies to Level II and III, but with relaxations: simpler measurement of defined benefit obligation without necessarily using the Projected Unit Credit Method, and reduced disclosures. They are not wholly exempt, and they are not required to follow the full Level I approach.

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