TMI - Tax Management India. Com

Home Acts & Rules Companies Law Rules Companies (Accounting Standards) Rules, 2021 Chapters List Annexure B Accounting Standard (AS) This

  • Login

Forget password       New User/ Regiser



 

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

Extract

..... yees, groups of employees or their representatives; (b) under legislative requirements, or through industry arrangements, whereby enterprises are required to contribute to state, industry or other multi-employer plans; or (c) by those informal practices that give rise to an obligation. Informal practices give rise to an obligation where the enterprise has no realistic alternative but to pay employee benefits. An example of such an obligation is where a change in the enterprise s informal practices would cause unacceptable damage to its relationship with employees. 4. Employee benefits include: (a) short-term employee benefits, such as wages, salaries and social security contributions (e.g., contribution to an insurance company by an employer to pay for medical care of its employees), paid annual leave, profitsharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees; (b) post-employment benefits such as gratuity, pension, other retirement benefits, post-employment life insurance and post-employment medical care; (c) other long-term emplo .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... re not under common control; and (b) use those assets to provide benefits to employees of more than one enterprise, on the basis that contribution and benefit levels are determined without regard to the identity of the enterprise that employs the employees concerned. 7.8 Other long-term employee benefits are employee benefits (other than post-employment benefits and termination benefits) which do not fall due wholly within twelve months after the end of the period in which the employees render the related service. 7.9 Termination benefits are employee benefits payable as a result of either: (a) an enterprise s decision to terminate an employee s employment before the normal retirement date; or (b) an employee s decision to accept voluntary redundancy in exchange for those benefits (voluntary retirement). 7.10 Vested employee benefits are employee benefits that are not conditional on future employment. 7.11 The present value of a defined benefit obligation is the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. 7.12 Current service cost is the increase in .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... es between the previous actuarial assumptions and what has actually occurred); and (b) the effects of changes in actuarial assumptions. 7.20 Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced). Short-term Employee Benefits 8. Short-term employee benefits include items such as: (a) wages, salaries and social security contributions; (b) short-term compensated absences (such as paid annual leave) where the absences are expected to occur within twelve months after the end of the period in which the employees render the related employee service; (c) profit-sharing and bonuses payable within twelve months after the end of the period in which the employees render the related service; and (d) non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees. 9. Accounting for short-term employee .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ation arises as employees render service that increases their entitlement to future compensated absences. The obligation exists, and is recognised, even if the compensated absences are non-vesting, although the possibility that employees may leave before they use an accumulated non-vesting entitlement affects the measurement of that obligation. 14. An enterprise should measure the expected cost of accumulating compensated absences as the additional amount that the enterprise expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date. 15. The method specified in the previous paragraph measures the obligation at the amount of the additional payments that are expected to arise solely from the fact that the benefit accumulates. In many cases, an enterprise may not need to make detailed computations to estimate that there is no material obligation for unused compensated absences. For example, a leave obligation is likely to be material only if there is a formal or informal understanding that unused leave may be taken as paid vacation. Example Illustrating Paragraphs 14 and 15 An enterprise has 100 employees, who are each entitled to five working .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... the end of the specified period. The measurement of such obligations reflects the possibility that some employees may leave without receiving profit-sharing payments. Example Illustrating Paragraph 18 A profit-sharing plan requires an enterprise to pay a specified proportion of its net profit for the year to employees who serve throughout the year. If no employees leave during the year, the total profit-sharing payments for the year will be 3% of net profit. The enterprise estimates that staff turnover will reduce the payments to 2.5% of net profit. The enterprise recognises a liability and an expense of 2.5% of net profit. 19. An enterprise may have no legal obligation to pay a bonus. Nevertheless, in some cases, an enterprise has a practice of paying bonuses. In such cases also, the enterprise has an obligation because the enterprise has no realistic alternative but to pay the bonus. The measurement of the obligation reflects the possibility that some employees may leave without receiving a bonus. 20. An enterprise can make a reliable estimate of its obligation under a profit-sharing or bonus plan when, and only when: (a) the formal terms of the plan contain a formula for determi .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... benefits) fall on the employee. 26. Examples of cases where an enterprise s obligation is not limited to the amount that it agrees to contribute to the fund are when the enterprise has an obligation through: (a) a plan benefit formula that is not linked solely to the amount of contributions; or (b) a guarantee, either indirectly through a plan or directly, of a specified return on contributions; or (c) informal practices that give rise to an obligation, for example, an obligation may arise where an enterprise has a history of increasing benefits for former employees to keep pace with inflation even where there is no legal obligation to do so. 27. Under defined benefit plans: (a) the enterprise’s obligation is to provide the agreed benefits to current and former employees; and (b) actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the enterprise. If actuarial or investment experience are worse than expected, the enterprise s obligation may be increased. 28. Paragraphs 29 to 43 below deal with defined contribution plans and defined benefit plans in the context of multi-employer plans, state plans and insured benefits. Multi-e .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... and post-employment benefit cost associated with the plan in the same way as for any other defined benefit plan. However, in some cases, an enterprise may not be able to identify its share of the underlying financial position and performance of the plan with sufficient reliability for accounting purposes. This may occur if: (a) the enterprise does not have access to information about the plan that satisfies the requirements of this Standard; or (b) the plan exposes the participating enterprises to actuarial risks associated with the current and former employees of other enterprises, with the result that there is no consistent and reliable basis for allocating the obligation, plan assets and cost to individual enterprises participating in the plan. In those cases, an enterprise accounts for the plan as if it were a defined contribution plan and discloses the additional information required by paragraph 30. 33. Multi-employer plans are distinct from group administration plans. A group administration plan is merely an aggregation of single employer plans combined to allow participating employers to pool their assets for investment purposes and reduce investment management and adminis .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... or local government or by another body (for example, an autonomous agency created specifically for this purpose) which is not subject to control or influence by the reporting enterprise. Some plans established by an enterprise provide both compulsory benefits which substitute for benefits that would otherwise be covered under a state plan and additional voluntary benefits. Such plans are not state plans. 39. State plans are characterised as defined benefit or defined contribution in nature based on the enterprise s obligation under the plan. Many state plans are funded in a manner such that contributions are set at a level that is expected to be sufficient to pay the required benefits falling due in the same period; future benefits earned during the current period will be paid out of future contributions. Nevertheless, in most state plans, the enterprise has no obligation to pay those future benefits: its only obligation is to pay the contributions as they fall due and if the enterprise ceases to employ members of the state plan, it will have no obligation to pay the benefits earned by such employees in previous years. For this reason, state plans are normally defined contribution .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... unting for defined contribution plans is straightforward because the reporting enterprise s obligation for each period is determined by the amounts to be contributed for that period. Consequently, no actuarial assumptions are required to measure the obligation or the expense and there is no possibility of any actuarial gain or loss. Moreover, the obligations are measured on an undiscounted basis, except where they do not fall due wholly within twelve months after the end of the period in which the employees render the related service. Recognition and Measurement 45. When an employee has rendered service to an enterprise during a period, the enterprise should recognise the contribution payable to a defined contribution plan in exchange for that service: (a) as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the balance sheet date, an enterprise should recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and (b) as an expense, unless another Accounting Standard requir .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... stimate of the amount of benefit that employees have earned in return for their service in the current and prior periods. This requires an enterprise to determine how much benefit is attributable to the current and prior periods (see paragraphs 68-72) and to make estimates (actuarial assumptions) about demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in salaries and medical costs) that will influence the cost of the benefit (see paragraphs 73-91); (b) discounting that benefit using the Projected Unit Credit Method in order to determine the present value of the defined benefit obligation and the current service cost (see paragraphs 65-67); (c) determining the fair value of any plan assets (see paragraphs 100-102); (d) determining the total amount of actuarial gains and losses (see paragraphs 92-93); (e) where a plan has been introduced or changed, determining the resulting past service cost (see paragraphs 94-99); and (f) where a plan has been curtailed or settled, determining the resulting gain or loss (see paragraphs 110-116). Where an enterprise has more than one defined benefit plan, the enterprise applies these pr .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... the balance sheet date, the most recent valuation is reviewed at the balance sheet date and updated to reflect any material transactions and other material changes in circumstances (including changes in interest rates) between the date of valuation and the balance sheet date. The fair value of any plan assets is determined at each balance sheet date. 59. The amount determined under paragraph 55 may be negative (an asset). An enterprise should measure the resulting asset at the lower of: (a) the amount determined under paragraph 55; and (b) the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. The present value of these economic benefits should be determined using the discount rate specified in paragraph 78. 60. An asset may arise where a defined benefit plan has been overfunded or in certain cases where actuarial gains are recognised. An enterprise recognises an asset in such cases because: (a) the enterprise controls a resource, which is the ability to use the surplus to generate future benefits; (b) that control is a result of past events (contributions paid by the enterprise and service render .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ced by many variables, such as final salaries, employee turnover and mortality, medical cost trends and, for a funded plan, the investment earnings on the plan assets. The ultimate cost of the plan is uncertain and this uncertainty is likely to persist over a long period of time. In order to measure the present value of the post-employment benefit obligations and the related current service cost, it is necessary to: (a) apply an actuarial valuation method (see paragraphs 65-67); (b) attribute benefit to periods of service (see paragraphs 68-72); and (c) make actuarial assumptions (see paragraphs 73-91). Actuarial Valuation Method 65. An enterprise should use the Projected Unit Credit Method to determine the present value of its defined benefit obligations and the related current service cost and, where applicable, past service cost. 66. The Projected Unit Credit Method (sometimes known as the accrued benefit method pro-rated on service or as the benefit/years of service method) considers each period of service as giving rise to an additional unit of benefit entitlement (see paragraphs 68-72) and measures each unit separately to build up the final obligation (see paragraphs 73-91). .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ermine current service cost) and the current and prior periods (in order to determine the present value of defined benefit obligations). An enterprise attributes benefit to periods in which the obligation to provide post-employment benefits arises. That obligation arises as employees render services in return for post-employment benefits which an enterprise expects to pay in future reporting periods. Actuarial techniques allow an enterprise to measure that obligation with sufficient reliability to justify recognition of a liability. Examples Illustrating Paragraph 69 1. A defined benefit plan provides a lump-sum benefit of Rs. 100 payable on retirement for each year of service. A benefit of Rs. 100 is attributed to each year. The current service cost is the present value of Rs. 100. The present value of the defined benefit obligation is the present value of Rs. 100, multiplied by the number of years of service up to the balance sheet date. If the benefit is payable immediately when the employee leaves the enterprise, the current service cost and the present value of the defined benefit obligation reflect the date at which the employee is expected to leave. Thus, because of the effe .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... f 25. The benefits vest immediately. No benefit is attributed to service before the age of 25 because service before that date does not lead to benefits (conditional or unconditional). A benefit of Rs. 100 is attributed to each subsequent year. 71. The obligation increases until the date when further service by the employee will lead to no material amount of further benefits. Therefore, all benefit is attributed to periods ending on or before that date. Benefit is attributed to individual accounting periods under the plan s benefit formula. However, if an employee s service in later years will lead to a materially higher level of benefit than in earlier years, an enterprise attributes benefit on a straight-line basis until the date when further service by the employee will lead to no material amount of further benefits. That is because the employee s service throughout the entire period will ultimately lead to benefit at that higher level. Examples Illustrating Paragraph 71 1. A plan pays a lump-sum benefit of Rs. 1,000 that vests after ten years of service. The plan provides no further benefit for subsequent service. A benefit of Rs. 100 (Rs. 1,000 divided by ten) is attributed to .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... plan reimburses 10% of an employee s post-employment medical costs if the employee leaves after more than ten and less than twenty years of service and 50% of those costs if the employee leaves after twenty or more years of service. Service in later years will lead to a materially higher level of benefit than in earlier years. Therefore, for employees expected to leave after twenty or more years, the enterprise attributes benefit on a straight-line basis under paragraph 69. Service beyond twenty years will lead to no material amount of further benefits. Therefore, the benefit attributed to each of the first twenty years is 2.5% of the present value of the expected medical costs (50% divided by twenty). For employees expected to leave between ten and twenty years, the benefit attributed to each of the first ten years is 1% of the present value of the expected medical costs. For these employees, no benefit is attributed to service between the end of the tenth year and the estimated date of leaving. For employees expected to leave within ten years, no benefit is attributed. 72. Where the amount of a benefit is a constant proportion of final salary for each year of service, future sala .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ips between factors such as inflation, rates of salary increase, the return on plan assets and discount rates. For example, all assumptions which depend on a particular inflation level (such as assumptions about interest rates and salary and benefit increases) in any given future period assume the same inflation level in that period. 77. An enterprise determines the discount rate and other financial assumptions in nominal (stated) terms, unless estimates in real (inflation- adjusted) terms are more reliable, for example, where the benefit is index- linked and there is a deep market in index-linked bonds of the same currency and term. Actuarial Assumptions: Discount Rate 78. The rate used to discount post-employment benefit obligations (both funded and unfunded) should be determined by reference to market yields at the balance sheet date on government bonds. The currency and term of the government bonds should be consistent with the currency and estimated term of the post-employment benefit obligations. 79. One actuarial assumption which has a material effect is the discount rate. The discount rate reflects the time value of money but not the actuarial or investment risk. Furthermor .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... e changes in general price levels or general salary levels. 84. Estimates of future salary increases take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. 85. If the formal terms of a plan (or an obligation that goes beyond those terms) require an enterprise to change benefits in future periods, the measurement of the obligation reflects those changes. This is the case when, for example: (a) the enterprise has a past history of increasing benefits, for example, to mitigate the effects of inflation, and there is no indication that this practice will change in the future; or (b) actuarial gains have already been recognised in the financial statements and the enterprise is obliged, by either the formal terms of a plan (or an obligation that goes beyond those terms) or legislation, to use any surplus in the plan for the benefit of plan participants (see paragraph 96(c)). 86. Actuarial assumptions do not reflect future benefit changes that are not set out in the formal terms of the plan (or an obligation that goes beyond those terms) at the balance sheet date. Such changes will result in: (a) past service cost, to .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... aph 61). 92A. Paragraph 145(b)(iii) explains the need to consider any unrecognised part of the transitional liability in accounting for subsequent actuarial gains. 93. Actuarial gains and losses may result from increases or decreases in either the present value of a defined benefit obligation or the fair value of any related plan assets. Causes of actuarial gains and losses include, for example: (a) unexpectedly high or low rates of employee turnover, early retirement or mortality or of increases in salaries, benefits (if the terms of a plan provide for inflationary benefit increases) or medical costs; (b) the effect of changes in estimates of future employee turnover, early retirement or mortality or of increases in salaries, benefits (if the terms of a plan provide for inflationary benefit increases) or medical costs; (c) the effect of changes in the discount rate; and (d) differences between the actual return on plan assets and the expected return on plan assets (see paragraphs 107-109). Past Service Cost 94. In measuring its defined benefit liability under paragraph 55, an enterprise should recognise past service cost as an expense on a straight- line basis over the average per .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... benefit increase has not yet been formally awarded (the resulting increase in the obligation is an actuarial loss and not past service cost, see paragraph 85(b)); (d) the increase in vested benefits (not on account of new or improved benefits) when employees complete vesting requirements (there is no past service cost because the estimated cost of benefits was recognised as current service cost as the service was rendered); and (e) the effect of plan amendments that reduce benefits for future service (a curtailment). 97. An enterprise establishes the amortisation schedule for past service cost when the benefits are introduced or changed. It would be impracticable to maintain the detailed records needed to identify and implement subsequent changes in that amortisation schedule. Moreover, the effect is likely to be material only where there is a curtailment or settlement. Therefore, an enterprise amends the amortisation schedule for past service cost only if there is a curtailment or settlement. 98. Where an enterprise reduces benefits payable under an existing defined benefit plan, the resulting reduction in the defined benefit liability is recognised as (negative) past service cos .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... tle a defined benefit obligation. Qualifying insurance policies, as defined in paragraph 7, are plan assets. An enterprise accounts for qualifying insurance policies in the same way as for all other plan assets and paragraph 103 does not apply (see paragraphs 40-43 and 102). 105. When an insurance policy is not a qualifying insurance policy, that insurance policy is not a plan asset. Paragraph 103 deals with such cases: the enterprise recognises its right to reimbursement under the insurance policy as a separate asset, rather than as a deduction in determining the defined benefit liability recognised under paragraph 55; in all other respects, including for determination of the fair value, the enterprise treats that asset in the same way as plan assets. Paragraph 120(f)(iii) requires the enterprise to disclose a brief description of the link between the reimbursement right and the related obligation. Example Illustrating Paragraphs 103-105 (Amount in Rs.) Liability recognised in balance sheet being the present value of obligation 1,258 Rights under insurance policies that exactly match the amount and timing of some of the benefits payable under the plan. 1,092 Those benefits have a .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... Add benefits paid 1,900 Actual return on plan assets 2,000 The difference between the expected return on plan assets (Rs. 1,175) and the actual return on plan assets (Rs. 2,000) is an actuarial gain of Rs. 825. Therefore, the net actuarial gain of Rs. 765 (Rs. 825 Rs. 60 (actuarial loss on the obligation)) would be recognised in the statement of profit and loss. The expected return on plan assets for 20X2 will be based on market expectations at 1/1/X2 for returns over the entire life of the obligation. Curtailments and Settlements 110. An enterprise should recognise gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on a curtailment or settlement should comprise: (a) any resulting change in the present value of the defined benefit obligation; (b) any resulting change in the fair value of the plan assets; (c) any related past service cost that, under paragraph 94, had not previously been recognised. 111. Before determining the effect of a curtailment or settlement, an enterprise should remeasure the obligation (and the related plan assets, if any) using current actuarial assumptions (including curre .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ognised under paragraph 145(b)). The proportionate share is determined on the basis of the present value of the obligations before and after the curtailment or settlement, unless another basis is more rational in the circumstances. Example Illustrating Paragraph 116 An enterprise discontinues a business segment and employees of the discontinued segment will earn no further benefits. This is a curtailment without a settlement. Using current actuarial assumptions (including current market interest rates and other current market prices) immediately before the curtailment, the enterprise has a defined benefit obligation with a net present value of Rs. 1,000 and plan assets with a fair value of Rs. 820 and unrecognised past service cost of Rs. 50. The enterprise had first adopted this Standard one year before. This increased the net liability by Rs. 100, which the enterprise chose to recognise over five years (see paragraph 145(b)). The curtailment reduces the net present value of the obligation by Rs. 100 to Rs. 900. Of the previously unrecognised past service cost and transitional amounts, 10% (Rs. 100/Rs. 1000) relates to the part of the obligation that was eliminated through the cur .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... enterprise s accounting policy for recognising actuarial gains and losses. (b) a general description of the type of plan. (c) a reconciliation of opening and closing balances of the present value of the defined benefit obligation showing separately, if applicable, the effects during the period attributable to each of the following: (i) current service cost, (ii) interest cost, (iii) contributions by plan participants, (iv) actuarial gains and losses, (v) foreign currency exchange rate changes on plans measured in a currency different from the enterprise s reporting currency, (vi) benefits paid, (vii) past service cost, (viii) amalgamations, (ix) curtailments, and (x) settlements. (d) an analysis of the defined benefit obligation into amounts arising from plans that are wholly unfunded and amounts arising from plans that are wholly or partly funded. (e) a reconciliation of the opening and closing balances of the fair value of plan assets and of the opening and closing balances of any reimbursement right recognised as an asset in accordance with paragraph 103 showing separately, if applicable, the effects during the period attributable to each of the following: (i) expected return on .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ent right recognised as an asset in accordance with paragraph 103. (l) the principal actuarial assumptions used as at the balance sheet date, including, where applicable: (i) the discount rates; (ii) the expected rates of return on any plan assets for the periods presented in the financial statements; (iii) the expected rates of return for the periods presented in the financial statements on any reimbursement right recognised as an asset in accordance with paragraph 103; (iv) medical cost trend rates; and (v) any other material actuarial assumptions used. An enterprise should disclose each actuarial assumption in absolute terms (for example, as an absolute percentage) and not just as a margin between different percentages or other variables. Apart from the above actuarial assumptions, an enterprise should include an assertion under the actuarial assumptions to the effect that estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. (m) the effect of an increase of one percentage point and the effect of a decrease of one percentage point in .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... e form of weighted averages or of relatively narrow ranges. 123. Paragraph 30 requires additional disclosures about multi-employer defined benefit plans that are treated as if they were defined contribution plans. 124. Where required by AS 18, Related Party Disclosures, an enterprise discloses information about: (a) related party transactions with post-employment benefit plans; and (b) post-employment benefits for key management personnel. 125. Where required by AS 29, Provisions, Contingent Liabilities and Contingent Assets an enterprise discloses information about contingent liabilities arising from post-employment benefit obligations. Illustrative Disclosures 126. Illustration II attached to the Standard contains illustrative disclosures. Provided that a Small and Medium-sized Company, as defined in the Notification, may not apply the disclosure requirements laid down in paragraphs 119 to 123 of the Standard in respect of accounting for defined benefit plans. However, such company should disclose actuarial assumptions as per paragraph 120(l) of the Standard. Other Long-term Employee Benefits 127. Other long-term employee benefits include, for example: (a) long-term compensated a .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ability that payment will be required an d t h e length of time for which payment is expected to be made. If the level of benefit is the same for any disabled employee regardless of years of service, the expected cost of those benefits is recognised when an event occurs that causes a long-term disability. Provided that a Small and Medium-sized Company, as defined in the Notification, may not apply the recognition and measurement principles laid down in paragraphs 129 to 131 of the Standard in respect of accounting for other long-term employee benefits. However, such a company should actuarially determine and provide for the accrued liability in respect of other long-term employee benefits as follows: The method used for actuarial valuation should be the Projected Unit Credit Method ; and discount rate used should be determined by reference to market yields at the balance sheet date on government bonds as per paragraph 78 of the Standard. Disclosure 132. Although this Standard does not require specific disclosures about other long-term employee benefits, other Accounting Standards may require disclosures, for example, where the expense resulting from such benefits is of such size, n .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... e on involuntary termination is a termination benefit. 137. Termination benefits are recognised as an expense immediately. 138. Where an enterprise recognises termination benefits, the enterprise may also have to account for a curtailment of retirement benefits or other employee benefits (see paragraph 110). Measurement 139. Where termination benefits fall due more than 12 months after the balance sheet date, they should be discounted using the discount rate specified in paragraph 78. Provided that a Small and Medium-sized Company, as defined in the Notification , may not discount amounts that fall due more than 12 months after the balance sheet date. Disclosure 140. Where there is uncertainty about the number of employees who will accept an offer of termination benefits, a contingent liability exists. As required by AS 29, Provisions, Contingent Liabilities and Contingent Assets an enterprise discloses information about the contingent liability unless the possibility of an outflow in settlement is remote. 141. As required by AS 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies an enterprise discloses the nature and amount of an expense if .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... e sheet date (1) the amount of the increase that remains unrecognised; and (2) the amount recognised in the current period; (iii) limit the recognition of subsequent actuarial gains (but not negative past service cost) only to the extent that the net cumulative unrecognised actuarial gains (before recognition of that actuarial gain) exceed the unrecognised part of the transitional liability; and (iv) include the related part of the unrecognised transitional liability in determining any subsequent gain or loss on settlement or curtailment. If the transitional liability is less than the liability that would have been recognised at the same date as per the pre-revised AS 15, the enterprise should recognise that decrease immediately as an adjustment against the opening balance of revenue reserves and surplus. Example Illustrating Paragraphs 144 and 145 At 31st March 20X7, an enterprise s balance sheet includes a pension liability of Rs. 100, recognised as per the pre-revised AS 15 issued by the ICAI in 1995. The enterprise adopts the Standard as of 1st April 20X7, when the present value of the obligation under the Standard is Rs. 1,300 and the fair value of plan assets is Rs. 1,000. On .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... ther Accounting Standards. Background Information The following information is given about a funded defined benefit plan. To keep interest computations simple, all transactions are assumed to occur at the year end. The present value of the obligation and the fair value of the plan assets were both Rs. 1,000 at 1 April, 20X4. (Amount in Rs.) 20X4-X5 20X5-X6 20X6-X7 Discount rate at start of year 10.0% 9.0% 8.0% Expected rate of return on plan assets at start of year 12.0% 11.1% 10.3% Current service cost 130 140 150 Benefits paid 150 180 190 Contributions paid 90 100 110 Present value of obligation at 31 March 1,141 1,197 1,295 Fair value of plan assets at 31 March 1,092 1,109 1,093 Expected average remaining working lives of employees (years) 10 10 10 In 20X5-X6, the plan was amended to provide additional benefits with effect from 1 April 20X5. The present value as at 1 April 20X5 of additional benefits for employee service before 1 April 20X5 was Rs. 50 for vested benefits and Rs. 30 for non-vested benefits. As at 1 April 20X5, the enterprise estimated that the average period until the nonvested benefits would become vested was three years; the past service cost arising from addit .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... nd loss 139 119 234 Actual return on plan assets: Expected return on plan assets 120 121 114 Actuarial gain (loss) on plan assets 32 (24) (50) Actual return on plan assets 152 97 64 Note: see example illustrating paragraphs 103-105 for presentation of reimbursements. Illustration II Illustrative Disclosures This illustration is illustrative only and does not form part of the Standard. The purpose of this illustration is to illustrate the application of the Standard to assist in clarifying its meaning. Extracts from notes to the financial statements show how the required disclosures may be aggregated in the case of a large multi-national group that provides a variety of employee benefits. These extracts do not necessarily provide all the information required under the disclosure and presentation requirements of AS 15 and other Accounting Standards. In particular, they do not illustrate the disclosure of: (a) accounting policies for employee benefits (see AS 1 Disclosure of Accounting Policies). Paragraph 120(a) of the Standard requires this disclosure to include the enterprise s accounting policy for recognising actuarial gains and losses. (b) a general description of the type of pl .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X

..... n assets representing reconciliation of the opening and closing balances thereof are as follows: Defined benefit pension plans 20X5-X6 20X4-X5 Opening fair value of plan assets 17,280 9,200 Expected return 900 650 Actuarial gains and (losses) (300) 1,600 Assets distributed on settlements (400) - Contributions by employer 700 350 Assets acquired in an amalgamation in the nature of purchase - 6,000 Exchange differences on foreign plans 890 (120) Benefits paid (650) (400) 18,420 17,280 The Group expects to contribute Rs. 900 to its defined benefit pension plans in 20X6-X7. The major categories of plan assets as a percentage of total plan assets are as follows: Defined benefit Post-employment pension plans medical benefits 20X5-X6 20X4-X5 20X5-X6 20X4-X5 Government of India Securities 80% 82% 78% 81% High quality corporate bonds 11% 10% 12% 12% Equity shares of listed companies 4% 3% 10% 7% Property 5% 5% - Principal actuarial assumptions at the balance sheet date (expressed as weighted averages): 20X5-X6 20X4-X5 Discount rate at 31 March 5.0% 6.5% Expected return on plan assets at 31 March 5.4% 7.0% Proportion of employees opting for early retirement 30% 30% Annual increase in healthc .....

X X   X X   Extracts   X X   X X

Login / Subscribe to Access Full Page

AS - 15 - Employee Benefits - Companies (Accounting Standards) Rules, 2021

X X   X X   Extracts   X X   X X