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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Tarang Textiles Ltd gives its factory staff a paid-leave benefit that has so far been non-accumulating and expected to be settled within twelve months of each reporting period. In the current year the management expects, for one batch of employees, that settlement will be delayed by a few weeks beyond twelve months because of a temporary shutdown. Under Ind AS 19, how should this benefit be treated?

The benefit remains a short-term employee benefit and need not be reclassified. Ind AS 19 states that a temporary change in the expected timing of settlement does not require reclassification. Only a change in the benefit's characteristics, or a non-temporary change in timing expectations, requires reconsidering the classification.

  1. AReclassify it as a long-term employee benefit and remeasure it using the projected unit credit method
  2. BReclassify it as a post-employment benefit and recognise remeasurements in OCI
  3. CNeed not reclassify it, because the change in expected timing of settlement is only temporaryCorrect
  4. DReclassify it as a termination benefit from the date the shutdown starts

Explanation

Ind AS 19 says an entity need not reclassify a short-term employee benefit if its expectations of the timing of settlement change temporarily. Reclassification is considered only if the characteristics of the benefit change or the change in timing expectation is not temporary. Here the delay is temporary and the characteristics are unchanged, so the benefit stays short-term.

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