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CMA Intermediate · Corporate Accounting and Auditing · Employee Benefits (Ind AS 19)

Which statement about the classification of post-employment benefit plans under Ind AS 19 is correct?

Plans are classified by their economic substance, derived from the plan's principal terms and conditions. Neither legal form, the presence of a trust, nor management's preference decides whether a plan is defined contribution or defined benefit.

  1. AClassification depends on the legal form of the plan documents only
  2. BClassification depends on the economic substance of the plan derived from its principal terms and conditionsCorrect
  3. CClassification depends on whether a separate trust fund is set up
  4. DClassification is at the entity's choice between defined contribution and defined benefit

Explanation

Paragraph 27 says plans are classified as defined contribution or defined benefit depending on the economic substance of the plan as derived from its principal terms and conditions. Legal form, trust existence or free choice are not the test.

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