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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Sundaram Textiles Ltd gives its employees a long-service award payable after 15 years of service. At the year end, the actuarial valuation shows that the present value of the obligation has risen because the actuarial assumption on employee attrition changed. How should the resulting change in the liability be accounted for under Ind AS 19?

The increase is recognised in profit or loss. Ind AS 19 uses a simplified method for other long-term employee benefits and does not recognise their remeasurements in other comprehensive income. That treatment is reserved for post-employment defined benefit plans, so a long-service award liability change affects profit or loss.

  1. ARecognise it in other comprehensive income as a remeasurement and never reclassify it to profit or loss
  2. BRecognise it in profit or loss, because the standard does not allow remeasurements of other long-term employee benefits to be taken to other comprehensive incomeCorrect
  3. CAdjust it against opening retained earnings as a prior period item
  4. DIgnore it until the award is actually paid to the employee

Explanation

Other long-term employee benefits use a simplified method. Unlike post-employment benefits, the method does not recognise remeasurements in other comprehensive income. The actuarial change therefore goes to profit or loss. The OCI option applies to defined benefit post-employment plans, not to long-service awards.

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