Skip to content

CA Intermediate · Advanced Accounting · AS 15 Employee Benefits

Sunrise Textiles Ltd. allows its employees to carry forward unused paid leave up to 10 days, which can be availed in the following year only (non-vesting, accumulating). At the balance sheet date, 40 employees each have 3 days of unused leave carried forward, and the company expects them to use these within 12 months. The average daily wage is Rs 1,200. Under AS 15, what amount should be recognised as a liability for short-term accumulating compensated absences?

The liability is Rs 1,44,000. AS 15 requires recognising the expected cost of short-term accumulating compensated absences as employees render service that increases their entitlement, even if the leave is non-vesting. Unused days are 40 x 3 = 120, multiplied by Rs 1,200 per day.

  1. ARs 1,44,000Correct
  2. BRs 0, as the leave is non-vesting
  3. CRs 36,000
  4. DRs 1,20,000

Explanation

For short-term accumulating compensated absences, the expected additional cost is recognised even if the leave is non-vesting. Total days = 40 x 3 = 120; cost = 120 x Rs 1,200 = Rs 1,44,000. Nil would be wrong because non-vesting only affects the probability of use, not recognition.

Did you get it right without looking?

One question tells you little. A timed set on AS 15 Employee Benefits shows your real accuracy, how long you take and where you lose marks.

Practise AS 15 Employee BenefitsFree diagnostic mock

More AS 15 Employee Benefits questions