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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Vihaan Textiles Ltd pays an annual long-service award to employees who complete 15 years of service. At the reporting date, actuarial valuation shows a remeasurement loss of ₹4,00,000 on this obligation because the attrition assumption changed. How should Vihaan Textiles Ltd treat this loss under Ind AS 19?

The ₹4,00,000 remeasurement loss is recognised in profit or loss. Ind AS 19 uses a simplified method for other long-term employee benefits, such as long-service awards, and that method does not recognise remeasurements in other comprehensive income, unlike post-employment defined benefit plans.

  1. ARecognise it in other comprehensive income and never reclassify it to profit or loss
  2. BRecognise it in profit or loss, because other long-term employee benefits do not recognise remeasurements in other comprehensive incomeCorrect
  3. CAdjust it directly against opening retained earnings as a prior period item
  4. DDefer it and amortise it over the remaining service lives of the employees

Explanation

Ind AS 19 requires a simplified method for other long-term employee benefits. Unlike post-employment benefits, the method does not recognise remeasurements in other comprehensive income. The loss therefore goes to profit or loss. Option A applies the post-employment treatment, which is wrong here.

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