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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Zenith Logistics Ltd pays a quarterly productivity bonus expected to be settled within twelve months after the period in which employees render the service. In the current year, the payment of one bonus is delayed temporarily by two months beyond twelve months because of a payroll system migration, and management still expects normal timing in future. How should this be treated under Ind AS 19?

The bonus stays a short-term employee benefit. Ind AS 19 says no reclassification is needed when expectations about settlement timing change only temporarily; reclassification is considered only if the benefit's characteristics change or the timing change is not temporary.

  1. AReclassify the bonus as an other long-term employee benefit and discount it
  2. BReclassify it as a post-employment benefit
  3. CContinue as short-term employee benefit, since a temporary change in expected timing of settlement does not require reclassificationCorrect
  4. DTreat it as a termination benefit

Explanation

Ind AS 19 states that 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 change or the timing change is not temporary. Here the delay is temporary, so the classification is retained.

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