Skip to content

CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Meera Foods Ltd operates a defined contribution provident scheme. Its employees earn Rs 8 crore of salary in the year, and the company contributes 12% of salary. By year end, it has paid Rs 80 lakh to the fund and the remaining contribution is unpaid. Which is the correct treatment under Ind AS 19?

The company recognises an expense of Rs 96 lakh, which is 12% of Rs 8 crore, and a liability of Rs 16 lakh for the unpaid portion. Under a defined contribution plan the obligation equals contributions due for service rendered, with no actuarial valuation required.

  1. AExpense of Rs 96 lakh and a liability of Rs 16 lakh after deducting the contribution paidCorrect
  2. BExpense of Rs 80 lakh only, as the unpaid amount is recognised when paid
  3. CExpense of Rs 96 lakh, with the unpaid Rs 16 lakh disclosed as a contingent liability
  4. DExpense of Rs 96 lakh with actuarial valuation of the liability using projected unit credit method

Explanation

Contribution due for the service rendered is 12% x Rs 8 crore = Rs 96 lakh, recognised as expense. Rs 80 lakh paid reduces the amount, leaving Rs 16 lakh as an accrued liability. No actuarial method is needed for a defined contribution plan, and the unpaid amount is a present obligation, not a contingent one.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 19 Employee Benefits shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 19 Employee BenefitsFree diagnostic mock

More Ind AS 19 Employee Benefits questions