TMI BlogEmployee BenefitsX X X X Extracts X X X X X X X X Extracts X X X X ..... her formal agreements between an entity and individual employees, groups of employees or their representatives; (b) under legislative requirements, or through industry arrangements, whereby entities are required to contribute to national, state, industry or other multi-employer plans; or (c) by those informal practices that give rise to a constructive obligation. Informal practices give rise to a constructive obligation where the entity has no realistic alternative but to pay employee benefits. An example of a constructive obligation is where a change in the entity s informal practices would cause unacceptable damage to its relationship with employees. 5 Employee benefits include: (a) short-term employee benefits, such as the following, if expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services: (i) wages, salaries and social security contributions; (ii) paid annual leave and paid sick leave; (iii) profit-sharing and bonuses; and (iv) non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees; (b) post- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gements under which an entity provides post-employment benefits for one or more employees. Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Defined benefit plans are post-employment benefit plans other than defined contribution plans. Multi-employer plans are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that: (a) pool the assets contributed by various entities that are not under common control; and (b) use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels are determined without regard to the identity of the entity that employs the employees. Definitions relating to the net defined benefit liability (asset) The net defined benefit liability (asset) is the deficit or surplus, adjusted for any effect of limiting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articipants at the measurement date. (See Ind AS 113, Fair Value Measurement .) Definitions relating to defined benefit cost Service cost comprises: (a) current service cost , which is the increase in the present value of the defined benefit obligation resulting from employee service in the current period; (b) past service cost, which is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan); and (c) any gain or loss on settlement. Net interest on the net defined benefit liability (asset) is the change during the period in the net defined benefit liability (asset) that arises from the passage of time. Remeasurements of the net defined benefit liability (asset) comprise: (a) actuarial gains and losses; (b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and (c) any change in the effect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid in exchange for that service: (a) as a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, an entity shall 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. (b) as an expense, unless another Ind AS requires or permits the inclusion of the benefits in the cost of an asset (see, for example, Ind AS 2, Inventories, and Ind AS 16, Property, Plant and Equipment ). 12 Paragraphs 13, 16 and 19 explain how an entity shall apply paragraph 11 to short-term employee benefits in the form of paid absences and profit-sharing and bonus plans. Short-term paid absences 13 An entity shall recognise the expected cost of short-term employee benefits in the form of paid absences under paragraph 11 as follows: (a) in the case of accumulating paid absences, when the employees render service that increases their entitlement to future paid absences. (b) in the case of non-accumulating paid absences, when the absences occur. 14 An entity may pay em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the remaining eight employees will take an average of six and a half days each. The entity expects that it will pay an additional twelve days of sick pay as a result of the unused entitlement that has accumulated at 31 December 20X1 (one and a half days each, for eight employees). Therefore, the entity recognises a liability equal to twelve days of sick pay. 18 Non-accumulating paid absences do not carry forward: they lapse if the current period s entitlement is not used in full and do not entitle employees to a cash payment for unused entitlement on leaving the entity. This is commonly the case for sick pay (to the extent that unused past entitlement does not increase future entitlement), maternity or paternity leave and paid absences for jury service or military service. An entity recognises no liability or expense until the time of the absence, because employee service does not increase the amount of the benefit. Profit-sharing and bonus plans 19 An entity shall recognise the expected cost of profit-sharing and bonus payments under paragraph 11 when, and only when: (a) the entity has a present legal or constructive obligati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service, those payments are other long-term employee benefits (see paragraphs 153 158). Disclosure 25 Although this Standard does not require specific disclosures about short-term employee benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits for key management personnel. Ind AS 1, Presentation of Financial Statements, requires disclosure of employee benefits expense. Post-employment benefits: distinction between defined contribution plans and defined benefit plans 26 Post-employment benefits include items such as the following: (a) retirement benefits (eg pensions and lump sum payments on retirement); and (b) other post-employment benefits, such as post-employment life insurance and post-employment medical care. Arrangements whereby an entity provides post-employment benefits are post-employment benefit plans. An entity applies this Standard to all such arrangements whether or not they involve the establishment of a separate entity to receive contributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned contribution plan or a defined benefit plan under the terms of the plan (including any constructive obligation that goes beyond the formal terms). 33 If an entity participates in a multi-employer defined benefit plan, unless paragraph 34 applies, it shall: (a) account for its proportionate share of the defined benefit obligation, plan assets and cost associated with the plan in the same way as for any other defined benefit plan; and (b) disclose the information required by paragraphs 135 148 (excluding paragraph 148(d)). 34 When sufficient information is not available to use defined benefit accounting for a multiemployer defined benefit plan, an entity shall: (a) account for the plan in accordance with paragraphs 51 and 52 as if it were a defined contribution plan; and (b) disclose the information required by paragraph 148. 35 One example of a multi-employer defined benefit plan is one where: (a) the plan is financed on a pay-as-you-go basis: contributions are set at a level that is expected to be sufficient to pay the benefits falling due in the same period; and future benefits earned during the current period will be paid out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plan as if it were a defined contribution plan. A non-Ind AS 19 funding valuation shows a deficit of ₹ 100 million in the plan. The plan has agreed under contract a schedule of contributions with the participating employers in the plan that will eliminate the deficit over the next five years. The entity s total contributions under the contract are ₹ 8 million. The entity recognises a liability for the contributions adjusted for the time value of money and an equal expense in profit or loss. 38 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 administration costs, but the claims of different employers are segregated for the sole benefit of their own employees. Group administration plans pose no particular accounting problems because information is readily available to treat them in the same way as any other single employer plan and because such plans do not expose the participating entities to actuarial risks ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically for this purpose) that is not subject to control or influence by the reporting entity. Some plans established by an entity provide both compulsory benefits, as a substitute for benefits that would otherwise be covered under a state plan, and additional voluntary benefits. Such plans are not state plans. 45 State plans are characterised as defined benefit or defined contribution, depending on the entity s obligation under the plan. Many state plans are funded on a pay-as-you-go basis: 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 entity has no legal or constructive obligation to pay those future benefits: its only obligation is to pay the contributions as they fall due and if the entity ceases to employ members of the state plan, it will have no obligation to pay the benefits earned by its own employees in previous years. For this reason, state plans are normally defined contribution plans. However, when a state plan is a defined benefit plan an entity applies para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the reporting entity 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 are not expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. Recognition and measurement 51 When an employee has rendered service to an entity during a period, the entity shall 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 end of the reporting period, an entity shall 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. (b) as an expense, unless another Ind AS requires or permits the inclusion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) about demographic variables (such as employee turnover and mortality) and financial variables (such as future increases in salaries and medical costs) that will affect the cost of the benefit (see paragraphs 75 98). (ii) discounting that benefit in order to determine the present value of the defined benefit obligation and the current service cost (see paragraphs 67 69 and 83 86). (iii) deducting the fair value of any plan assets (see paragraphs 113 115) from the present value of the defined benefit obligation. (b) determining the amount of the net defined benefit liability (asset) as the amount of the deficit or surplus determined in (a), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling (see paragraph 64). (c) determining amounts to be recognised in profit or loss: 3 [ (i) current service cost (see paragraphs 70 74 and paragraph 122A). ] (ii) any past service cost and gain or loss on settlement (see paragraphs 99 112). (iii) net interest on the net defined benefit liability (asset) (see paragraphs 123 126). (d) determining the re-measurements of the net defined benefit liability (asset), to be recognised in other com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost-employment benefits assumes that an entity that is currently promising such benefits will continue to do so over the remaining working lives of employees. Balance Sheet 63 An entity shall recognise the net defined benefit liability (asset) in the balance sheet. 64 When an entity has a surplus in a defined benefit plan, it shall measure the net defined benefit asset at the lower of: (a) the surplus in the defined benefit plan; and (b) the asset ceiling, determined using the discount rate specified in paragraph 83. 65 A net defined benefit asset may arise where a defined benefit plan has been overfunded or where actuarial gains have arisen. An entity recognises a net defined benefit asset in such cases because: (a) the entity 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 entity and service rendered by the employee); and (c) future economic benefits are available to the entity in the form of a reduction in future contributions or a cash refund, either directly to the entity or indirectly to another plan in deficit. The asset c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Benefit attributed to: prior years 0 131 262 393 524 current year (1% of final salary) 131 131 131 131 131 current and prior years 131 262 393 524 655 Opening Obligation - 89 196 324 476 Interest at 10% 9 20 33 48 Current service cost 89 98 108 119 131 Closing Obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the present value of ₹ 100. The present value of the defined benefit obligation is the present value of ₹ 100, multiplied by the number of years of service up to the end of the reporting period. If the benefit is payable immediately when the employee leaves the entity, 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 effect of discounting, they are less than the amounts that would be determined if the employee left at the end of the reporting period. 2. A plan provides a monthly pension of 0.2 per cent of final salary for each year of service. The pension is payable from the age of 65. Benefit equal to the present value, at the expected retirement date, of a monthly pension of 0.2 per cent of the estimated final salary payable from the expected retirement date until the expected date of death is attributed to each year of service. The current service cost is the present value of that benefit. The present value of the defined benefit obligation is the present value of monthly pension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. 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 entity 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 73 1. A plan pays a lump sum benefit of ₹ 1,000 that vests after ten years of service. The plan provides no further benefit for subsequent service. A benefit of ₹ 100 (Rs.1,000 divided by ten) is attributed to each of the first ten years. The current service cost in each of the first ten years reflects the probability that the employee may not complete ten years of service. No benefit is attributed to subsequent years. 2. A plan pays a lump sum retirement benefit of ₹ 2,000 to all employees who are still employed at the age of 55 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en and less than twenty years of service and 50 per cent 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 entity attributes benefit on a straightline basis under paragraph 71. 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 per cent of the present value of the expected medical costs (50 per cent 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 per cent 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. 5. An entity has 1,000 employees. As per the statutory requirements, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the reporting period, but do not create an additional obligation. Therefore: (a) for the purpose of paragraph 70(b), salary increases do not lead to further benefits, even though the amount of the benefits is dependent on final salary; and (b) the amount of benefit attributed to each period is a constant proportion of the salary to which the benefit is linked. Example illustrating paragraph 74 Employees are entitled to a benefit of 3 per cent of final salary for each year of service before the age of 55. Benefit of 3 per cent of estimated final salary is attributed to each year up to the age of 55. This is the date when further service by the employee will lead to no material amount of further benefits under the plan. No benefit is attributed to service after that age. Actuarial assumptions 75 Actuarial assumptions shall be unbiased and mutually compatible. 76 Actuarial assumptions are an entity s best estimates of the variables that will determine the ultimate cost of providing post-employment benefits. Actuarial assumptions comprise: (a) demographic assumptions about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 82 In order to estimate the ultimate cost of the benefit an entity takes into consideration expected changes in mortality, for example by modifying standard mortality tables with estimates of mortality improvements. Actuarial assumptions: discount rate 1 [ 83 The rate used to discount post-employment benefit obligations (both funded and unfunded) shall be determined by reference to market yields at the end of the reporting period on government bonds. However, for currencies other than Indian rupee for which there is deep market in high quality corporate bonds, the market yields (at the end of the reporting period) on such high quality corporate bonds denominated in that currency shall be used. The currency and term of the government bonds or corporate bonds shall be consistent with the currency and estimated term of the post-employment benefit obligations. ] 84 One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the time value of money but not the actuarial or investment risk. Furthermore, the discount rate does not reflect the entity-specific credit risk borne by the entity s creditors, nor does it reflect the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nflation, and there is no indication that this practice will change in the future; (b) the entity is obliged, by either the formal terms of a plan (or a constructive obligation that goes beyond those terms) or legislation, to use any surplus in the plan for the benefit of plan participants (see paragraph 108(c)); or (c) benefits vary in response to a performance target or other criteria. For example, the terms of the plan may state that it will pay reduced benefits or require additional contributions from employees if the plan assets are insufficient. The measurement of the obligation reflects the best estimate of the effect of the performance target or other criteria. 89 Actuarial assumptions do not reflect future benefit changes that are not set out in the formal terms of the plan (or a constructive obligation) at the end of the reporting period. Such changes will result in: (a) past service cost, to the extent that they change benefits for service before the change; and (b) current service cost for periods after the change, to the extent that they change benefits for service after the change. 90 Estimates of future salary increases take account of inflation, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service period or dependent on the employee s age. Appendix A provides related application guidance. 94 For contributions from employees or third parties that are attributed to periods of service in accordance with paragraph 93(a), changes in the contributions result in: (a) current and past service cost (if those changes are not set out in the formal terms of a plan and do not arise from a constructive obligation); or (b) actuarial gains and losses (if those changes s are set out in the formal terms of a plan, or arise from a constructive obligation). 95 Some post-employment benefits are linked to variables such as the level of state retirement benefits or state medical care. The measurement of such benefits reflects the best estimate of such variables, based on historical data and other reliable evidence. 96 Assumptions about medical costs shall take account of estimated future changes in the cost of medical services, resulting from both inflation and specific changes in medical costs. 97 Measurement of post-employment medical benefits requires assumptions about the level and frequency of future claims and the cost of meeting those claims. An entity estim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice cost, or a gain or loss on settlement, in accordance with paragraphs 99 101 and paragraphs 102 112. In doing so, an entity shall not consider the effect of the asset ceiling. An entity shall then determine the effect of the asset ceiling after the plan amendment, curtailment or settlement and shall recognise any change in that effect in accordance with paragraph 57(d). ] Past service cost 102 Past service cost is the change in the present value of the defined benefit obligation resulting from a plan amendment or curtailment. 103 An entity shall recognise past service cost as an expense at the earlier of the following dates: (a) when the plan amendment or curtailment occurs; and (b) when the entity recognises related restructuring costs (see Ind AS 37) or termination benefits (see paragraph 165). 104 A plan amendment occurs when an entity introduces, or withdraws, a defined benefit plan or changes the benefits payable under an existing defined benefit plan. 105 A curtailment occurs when an entity significantly reduces the number of employees covered by a plan. A curtailment may arise from an isolated event, such as the closing of a plant, dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognise a gain or loss on the settlement of a defined benefit plan when the settlement occurs. 111 A settlement occurs when an entity enters into a transaction that eliminates all further legal or constructive obligation for part or all of the benefits provided under a defined benefit plan (other than a payment of benefits to, or on behalf of, employees in accordance with the terms of the plan and included in the actuarial assumptions). For example, a one-off transfer of significant employer obligations under the plan to an insurance company through the purchase of an insurance policy is a settlement; a lump sum cash payment, under the terms of the plan, to plan participants in exchange for their rights to receive specified post-employment benefits is not. 112 In some cases, an entity acquires an insurance policy to fund some or all of the employee benefits relating to employee service in the current and prior periods. The acquisition of such a policy is not a settlement if the entity retains a legal or constructive obligation (see paragraph 46) to pay further amounts if the insurer does not pay the employee benefits specified in the insurance policy. Paragraphs 116 119 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity recognises its right to reimbursement under the insurance policy as a separate asset, rather than as a deduction in determining the defined benefit deficit or surplus. Paragraph 140(b) requires the entity to disclose a brief description of the link between the reimbursement right and the related obligation. 119 If the right to reimbursement arises under an insurance policy that exactly matches the amount and timing of some or all of the benefits payable under a defined benefit plan, the fair value of the reimbursement right is deemed to be the present value of the related obligation (subject to any reduction required if the reimbursement is not recoverable in full). Components of defined benefit cost 120 An entity shall recognise the components of defined benefit cost, except to the extent that another Ind AS requires or permits their inclusion in the cost of an asset, as follows: 6 [ (a) service cost (see paragraphs 66 112 and paragraph 122A) in profit or loss; ] (b) net interest on the net defined benefit liability (asset) (see paragraphs 123 126) in profit or loss; and (c) remeasurements of the net defined benefit liability (asset) (see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on the net defined benefit liability (asset) can be viewed as comprising interest income on plan assets, interest cost on the defined benefit obligation and interest on the effect of the asset ceiling mentioned in paragraph 64. 10 [ 125 Interest income on plan assets is a component of the return on plan assets, and is determined by multiplying the fair value of the plan assets by the discount rate specified in paragraph 123A. An entity shall determine the fair value of the plan assets at the start of the annual reporting period. However, if an entity remeasures the net defined benefit liability (asset) in accordance with paragraph 99, the entity shall determine interest income for the remainder of the annual reporting period after the plan amendment, curtailment or settlement using the plan assets used to remeasure the net defined benefit liability (asset) in accordance with paragraph 99(b). In applying paragraph 125, the entity shall also take into account any changes in the plan assets held during the period resulting from contributions or benefit payments. The difference between the interest income on plan assets and the return on plan assets is included in the rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt rate. 129 Actuarial gains and losses do not include changes in the present value of the defined benefit obligation because of the introduction, amendment, curtailment or settlement of the defined benefit plan, or changes to the benefits payable under the defined benefit plan. Such changes result in past service cost or gains or losses on settlement. 130 In determining the return on plan assets, an entity deducts the costs of managing the plan assets and any tax payable by the plan itself, other than tax included in the actuarial assumptions used to measure the defined benefit obligation (paragraph 76). Other administration costs are not deducted from the return on plan assets. Presentation Offset 131 An entity shall offset an asset relating to one plan against a liability relating to another plan when, and only when, the entity: (a) has a legally enforceable right to use a surplus in one plan to settle obligations under the other plan; and (b) intends either to settle the obligations on a net basis, or to realize the surplus in one plan and settle its obligation under the other plan simultaneously. 132 The offsetting criteria are similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uture salary increases and other benefits. 138 An entity shall assess whether all or some disclosures should be disaggregated to distinguish plans or groups of plans with materially different risks. For example, an entity may disaggregate disclosure about plans showing one or more of the following features: (a) different geographical locations. (b) different characteristics such as flat salary pension plans, final salary pension plans or postemployment medical plans. (c) different regulatory environments. (d) different reporting segments. (e) different funding arrangements (eg wholly unfunded, wholly or partly funded). Characteristics of defined benefit plans and risks associated with them 139 An entity shall disclose: (a) information about the characteristics of its defined benefit plans, including: (i) the nature of the benefits provided by the plan (eg final salary defined benefit plan or contribution-based plan with guarantee). (ii) a description of the regulatory framework in which the plan operates, for example the level of any minimum funding requirements, and any effect of the regulatory framework on the plan, such as the asset ceiling (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by plan participants. (g) payments from the plan, showing separately the amount paid in respect of any settlements. (h) the effects of business combinations and disposals. 142 An entity shall disaggregate the fair value of the plan assets into classes that distinguish the nature and risks of those assets, subdividing each class of plan asset into those that have a quoted market price in an active market (as defined in Ind AS 113, Fair Value Measurement ) and those that do not. For example, and considering the level of disclosure discussed in paragraph 136, an entity could distinguish between: (a) cash and cash equivalents; (b) equity instruments (segregated by industry type, company size, geography etc); (c) debt instruments (segregated by type of issuer, credit quality, geography etc); (d) real estate (segregated by geography etc); (e) derivatives (segregated by type of underlying risk in the contract, for example, interest rate contracts, foreign exchange contracts, equity contracts, credit contracts, longevity swaps etc); (f) investment funds (segregated by type of fund); (g) asset-backed securities; and (h) structured debt. 143 An entity sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to determine the entity s rate of contributions and any minimum funding requirements. (b) a description of the extent to which the entity can be liable to the plan for other entities obligations under the terms and conditions of the multi-employer plan. (c) a description of any agreed allocation of a deficit or surplus on: (i) wind-up of the plan; or (ii) the entity s withdrawal from the plan. (d) if the entity accounts for that plan as if it were a defined contribution plan in accordance with paragraph 34, it shall disclose the following, in addition to the information required by (a) (c) and instead of the information required by paragraphs 139 147: (i) the fact that the plan is a defined benefit plan. (ii) the reason why sufficient information is not available to enable the entity to account for the plan as a defined benefit plan. (iii) the expected contributions to the plan for the next annual reporting period. (iv) information about any deficit or surplus in the plan that may affect the amount of future contributions, including the basis used to determine that deficit or surplus and the implications, if any, for the entity. (v) an indication of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service: (a) long-term paid absences such as long-service or sabbatical leave; (b) jubilee or other long-service benefits; (c) long-term disability benefits; (d) profit-sharing and bonuses; and (e) deferred remuneration. 154 The measurement of other long-term employee benefits is not usually subject to the same degree of uncertainty as the measurement of post-employment benefits. For this reason, this Standard requires a simplified method of accounting for other long-term employee benefits. Unlike the accounting required for post-employment benefits, this method does not recognise remeasurements in other comprehensive income. Recognition and measurement 155 In recognising and measuring the surplus or deficit in another long-term employee benefit plan, an entity shall apply paragraphs 56 98 and 113 115. An entity shall apply paragraphs 116 119 in recognising and measuring any reimbursement right. 156 For other long-term employee benefits, an entity shall recognise the net total of the following amounts in profit or loss, except to the extent that another Ind AS requires or permits their inclusion in the cost of an asset: 12 [ (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Termination benefits are typically lump sum payments, but sometimes also include: (a) enhancement of post-employment benefits, either indirectly through an employee benefit plan or directly. (b) salary until the end of a specified notice period if the employee renders no further service that provides economic benefits to the entity. 162 Indicators that an employee benefit is provided in exchange for services include the following: (a) the benefit is conditional on future service being provided (including benefits that increase if further service is provided). (b) the benefit is provided in accordance with the terms of an employee benefit plan. 163 Some termination benefits are provided in accordance with the terms of an existing employee benefit plan. For example, they may be specified by statute, employment contract or union agreement, or may be implied as a result of the employer s past practice of providing similar benefits. As another example, if an entity makes an offer of benefits available for more than a short period, or there is more than a short period between the offer and the expected date of actual termination, the entity considers whether it has esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual employee) and the expected completion date. (c) The plan establishes the termination benefits that employees will receive in sufficient detail that employees can determine the type and amount of benefits they will receive when their employment is terminated. 168 When an entity recognises termination benefits, the entity may also have to account for a plan amendment or a curtailment of other employee benefits (see paragraph 103). Measurement 169 An entity shall measure termination benefits on initial recognition, and shall measure and recognise subsequent changes, in accordance with the nature of the employee benefit, provided that if the termination benefits are an enhancement to post-employment benefits, the entity shall apply the requirements for post-employment benefits. Otherwise: (a) if the termination benefits are expected to be settled wholly before twelve months after the end of the annual reporting period in which the termination benefit is recognised, the entity shall apply the requirements for short-term employee benefits. (b) if the termination benefits are not expected to be settled wholly before twelve months after the end of the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the closure of the factory. Benefits provided in exchange for service The incremental benefits that employees will receive if they provide services for the full tenmonth period are in exchange for services provided over that period. The entity accounts for them as short-term employee benefits because the entity expects to settle them before twelve months after the end of the annual reporting period. In this example, discounting is not required, so an expense of ₹ 200,000 (ie ₹ 2,000,000 10) is recognised in each month during the service period of ten months, with a corresponding increase in the carrying amount of the liability. Disclosure 171 Although this Standard does not require specific disclosures about termination benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits for key management personnel. Ind AS 1 requires disclosure of employee benefits expense. * A qualifying insurance policy is not necessarily an insurance contract, as defined in Ind AS 104, Insurance Contracts. 13 [ Transition and effective date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a liability if the required contributions will not be available to the entity once they have been paid. 3A [Refer Appendix 1]. Scope 4 This Appendix applies to all post-employment defined benefits and other long-term employee defined benefits. 5 For the purpose of this Appendix, minimum funding requirements are any requirements to fund a post-employment or other long-term defined benefit plan. Issues 6 The issues addressed in this Appendix are: (a) when refunds or reductions in future contributions should be regarded as available in accordance with the definition of the asset ceiling in paragraph 8 of Ind AS 19 . (b) how a minimum funding requirement might affect the availability of reductions in future contributions. (c) when a minimum funding requirement might give rise to a liability. Principles Availability of a refund or reduction in future contributions 7 An entity shall determine the availability of a refund or a reduction in future contributions in accordance with the terms and conditions of the plan and any statutory requirements in the jurisdiction of the plan. 8 An economic benefit, in the form of a refund or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the reporting period (being the fair value of the plan assets less the present value of the defined benefit obligation) that the entity has a right to receive as a refund, less any associated costs. For instance, if a refund would be subject to a tax other than income tax, an entity shall measure the amount of the refund net of the tax. 14 In measuring the amount of a refund available when the plan is wound up (paragraph 11(c)), an entity shall include the costs to the plan of settling the plan liabilities and making the refund. For example, an entity shall deduct professional fees if these are paid by the plan rather than the entity, and the costs of any insurance premiums that may be required to secure the liability on wind-up. 15 If the amount of a refund is determined as the full amount or a proportion of the surplus, rather than a fixed amount, an entity shall make no adjustment for the time value of money, even if the refund is realisable only at a future date. The economic benefit available as a contribution reduction 16 If there is no minimum funding requirement for contributions relating to future service, the economic benefit available as a reduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing basis and, for any factors not specified by that basis, assumptions consistent with those used to determine the defined benefit obligation and with the situation that exists at the end of the reporting period as determined by Ind AS 19. The estimate shall include any changes expected as a result of the entity paying the minimum contributions when they are due. However, the estimate shall not include the effect of expected changes in the terms and conditions of the minimum funding basis that are not substantively enacted or contractually agreed at the end of the reporting period. 22 When an entity determines the amount described in paragraph 20(b), if the future minimum funding requirement contributions for future service exceed the future IAS 19 service cost in any given period, that excess reduces the amount of the economic benefit available as a reduction in future contributions. However, the amount described in paragraph 20(b) can never be less than zero. When a minimum funding requirement may give rise to a liability 23 If an entity has an obligation under a minimum funding requirement to pay contributions to cover an existing shortfall on the minimum funding ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph deals with reason for amending IFRIC 14, which is irrelevant for Appendix B to Ind AS 19 . 14 [6 Paragraphs 172 to 177 of IAS 19 have not been included as these paragraphs relate to transition and effective date that are not relevant in Indian context. Paragraph 178 has not been included as it refers to amendments due to issuance of IFRS 17, Insurance Contracts, for which corresponding Ind AS is under formulation. However, in order to maintain consistency with paragraph numbers of IAS 19, the paragraph numbers are retained in Ind AS 19. ] ------------------------ Notes:- 1. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, 83 The rate used to discount post-employment benefit obligations (both funded and unfunded) shall be determined by reference to market yields at the end of the reporting period on government bonds. However, subsidiaries, associates, joint ventures and branches domiciled outside India shall discount post-employment benefit obligations arising on account of post855 employment benefit plans using the rate determined by reference to market yields at the end of the reporting period on high qualit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined by multiplying the net defined benefit liability (asset) by the discount rate specified in paragraph 83, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payments. 9. Inserted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VIII)] dated 30-03-2019 w.e.f. 01-04-2019 10. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VIII)] dated 30-03-2019 w.e.f. 01-04-2019 before it was read as 125 Interest income on plan assets is a component of the return on plan assets, and is determined by multiplying the fair value of the plan assets by the discount rate specified in paragraph 83, both as determined at the start of the annual reporting period, taking account of any changes in the plan assets held during the period as a result of contributions and benefit payments. The difference between the interest income on plan assets and the return on plan assets is included in the remeasurement of the net defined benefit liability (asset). 11. Substituted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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