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CA Intermediate · Advanced Accounting · AS 15 Employee Benefits

Sundaram Textiles Ltd. gives employees a bonus payable within twelve months after the end of the reporting period in which the employees render the related service. For the year ended 31 March 2026, the employee services rendered entitle employees to bonus of Rs 8,40,000, of which Rs 5,00,000 has been paid before the year end. Under AS 15, how should the company account for this?

The company should recognise an expense of Rs 8,40,000 and a liability of Rs 3,40,000. Bonus due within twelve months is a short-term employee benefit, recorded undiscounted when service is rendered. The amount paid is part of the expense, and the unpaid balance is accrued as a liability.

  1. ARecognise a liability of Rs 3,40,000 and an expense of Rs 8,40,000 for the yearCorrect
  2. BRecognise expense of Rs 3,40,000 only, since the balance was already paid
  3. CRecognise nothing until the remaining bonus is actually paid next year
  4. DRecognise the bonus as an actuarial liability measured by projected unit credit method

Explanation

Bonus payable within twelve months is a short-term employee benefit, recognised on an undiscounted basis as expense when service is rendered. Total expense is Rs 8,40,000; after the Rs 5,00,000 paid, the accrued liability is Rs 3,40,000. Recording only Rs 3,40,000 as expense ignores the amount already paid, which is also an expense for the year.

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