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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Sundaram Textiles Ltd pays its employees a long-service award after every 10 years of service. The company's finance head proposes to recognise actuarial gains and losses arising on remeasurement of this obligation in other comprehensive income, as is done for gratuity. Under Ind AS 19, what is the correct treatment?

Remeasurements of other long-term employee benefits such as a long-service award are recognised in profit or loss, not in other comprehensive income. Ind AS 19 prescribes a simplified method for these benefits, which excludes OCI recognition, unlike the treatment for post-employment benefits such as gratuity.

  1. ARecognise remeasurements of the long-service award in other comprehensive income, as for post-employment benefits
  2. BRecognise remeasurements of the long-service award in profit or loss, because the simplified method does not use other comprehensive incomeCorrect
  3. CIgnore remeasurements until the award is actually paid to the employees
  4. DRecognise remeasurements directly in retained earnings through the statement of changes in equity

Explanation

Ind AS 19 requires a simplified method for other long-term employee benefits. Unlike post-employment benefits, this method does not recognise remeasurements in other comprehensive income, so they go to profit or loss. Option A applies the post-employment treatment, which is wrong for long-service awards.

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