📖 Overview
This standard prescribes accounting treatment for employee benefits, including short-term benefits (salaries and wages), termination benefits, and retirement benefits. Defined benefit plans require actuarial valuations.
🎯 Scope
This standard applies to all employee benefits, including:
- Short-term benefits (salaries, wages, annual leave, bonuses).
- Termination benefits (end-of-service gratuity, severance pay).
- Retirement benefits (defined contribution plans, defined benefit plans).
- Other long-term benefits (long leave, long-service bonuses).
⚙️ Key Principles
1. **Short-term Benefits**: Recognized as an expense when the employee renders service.
2. **Termination Benefits**: Recognized upon termination of employment or when the employee accepts an offer for early retirement.
3. **Defined Contribution Plans**: The entity commits to paying fixed contributions; expense is recognized when contributions are due.
4. **Defined Benefit Plans**: The entity commits to providing specific benefits to employees; requires actuarial valuations.
📏 Measurement
**Short-term Benefits:** Measured at the undiscounted amount expected to be paid.
**Defined Contribution Plans:** Measured as contributions due for the period.
**Defined Benefit Plans:**
- The obligation is measured using the Projected Unit Credit Method.
- The obligation is discounted using the interest rate on high-quality government bonds.
- **Cost Components**: Service cost, net interest on the obligation, remeasurements.
✅ Recognition
**Short-term Benefits:** Recognized as expense in the period the employee renders service.
**Termination Benefits:** Recognized upon termination or acceptance of offer.
**Defined Contribution Plans:** Expense recognized when contributions are due.
**Defined Benefit Plans:**
- Service cost and net interest are recognized in the income statement.
- Remeasurements are recognized in OCI.
📊 Presentation
**On the Statement of Financial Position:**
- **Short-term Benefit Liability**: Presented within current liabilities.
- **Termination Benefit Liability**: Presented within current (due within one year) and non-current liabilities.
- **Retirement Benefit Liability**: Presented within long-term liabilities.
**On the Income Statement:**
- Employee benefits expense is presented within operating expenses.
📝 Disclosure Requirements
Disclosures required:
- Accounting policies for employee benefits.
- Nature and extent of benefit plans.
- Key actuarial assumptions (discount rate, salary increase rate, employee turnover rate).
- Amount of expense recognized.
- Reconciliation of liability from beginning to end of period.
- Plan risks (investment risk, interest rate risk, longevity risk).
🔗 Related Standards
IAS 1 (Presentation of Financial Statements), IAS 37 (Provisions)