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TMI BlogEmployee BenefitsX X X X Extracts X X X X X X X X Extracts X X X X ..... loyees, 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-employment benefits, such as the following: (i) retirement benefits (eg pensions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a net defined benefit asset to the asset ceiling. The deficit or surplus is: (a) the present value of the defined benefit obligation less (b) the fair value of plan assets (if any). The asset ceiling is the present value of any economic benefits availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (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 of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset). Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from: (a) experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and (b) the effects of changes in actuarial assumptions. The return on plan assets is interest, dividends and other income derived from the plan assets, together with realised and unrealised gains or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 employees for absence for various reasons including holidays, sickness and short term disability, maternity or paternity, jury service and military service. Entitlement to paid absences falls into two categories: (a) accumulating; and (b) non-accumulating. 15 Accumulating paid absences are those that are carried forward and can be used in future periods if the current period s entitlement is not used in full. Accumulating paid absences may be either vesting (in other words, employees are entitled to a cash payment for unused entitlement on leaving the entity) or non-vesting (when employees are not entitled to a cash payment for unused entitlement on leaving). An obligation arises as employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 obligation to make such payments as a result of past events; and (b) a reliable estimate of the obligation can be made. A present obligation exists when, and only when, the entity has no realistic alternative but to make the payments. 20 Under some profit-sharing plans, employees receive a share of the profit only if they remain with the entity for a specified period. Such plans create a constructive obligation as employees render service that increases the amount to be paid if they remain in service until the end of the specified period. The measurement of such constructive obligations reflects the possibility that some employees may leave without receiving profit-sharing payments. Example illustrating paragraph 20 A profit-sharing plan requires an entity to pay a specified proportion of its profit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angements 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 contributions and to pay benefits. 27 Post-employment benefit plans are classified as either defined contribution plans or defined benefit plans, depending on the economic substance of the plan as derived from its principal terms and conditions. 28 Under defined contribution plans the entity s legal or constructive obligation is limited to the amount that it agrees to contribute to the fund. Thus, the amount of the post-employment benefits received by the employee is determined by the amount of contributions paid by an entity (and perhaps also the employee) to a post-employment benefit plan or to an insurance company, together with investment returns arising from the contributions. In consequence, actuarial risk (that benefits will be less than expected) and investment risk (that assets invested will be insufficient to meet expected benefits) fall, in substance, on the employee. 29 Examples of cases where an entity s obligation is not limited to the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 future contributions; and (b) employees benefits are determined by the length of their service and the participating entities have no realistic means of withdrawing from the plan without paying a contribution for the benefits earned by employees up to the date of withdrawal. Such a plan creates actuarial risk for the entity: if the ultimate cost of benefits already earned at the end of the reporting period is more than expected, the entity will have either to increase its contributions or to persuade employees to accept a reduction in benefits. Therefore, such a plan is a defined benefit plan. 36 Where sufficient information is available about a multi-employer defined benefit plan, an entity accounts for its proportionate share of the defined benefit obligation, plan assets and postemployment cost associated with the plan in the same way as for any other defined benefit plan. However, an entity may not be able to identify its share of the underlying financial position and performance of the plan with sufficient reliability for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the participating entities to actuarial risks associated with the current and former employees of other entities. The definitions in this Standard require an entity to classify a group administration plan as a defined contribution plan or a defined benefit plan in accordance with the terms of the plan (including any constructive obligation that goes beyond the formal terms). * 39 In determining when to recognise, and how to measure, a liability relating to the wind-up of a multi- employer defined benefit plan, or the entity s withdrawal from a multi -employer defined benefit plan, an entity shall apply Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets . Defined benefit plans that share risks between entities under common control 40 Defined benefit plans that share risks between entities under common control, for example, a parent and its subsidiaries, are not multi-employer plans. 41 An entity participating in such a plan shall obtain information about the plan as a whole measured in accordance with this Standard on the basis of assumptions that apply to the plan as a whole. If there is a contractual agreement or stated policy for charging to individual group enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraphs 32 39. Insured benefits 46 An entity may pay insurance premiums to fund a post-employment benefit plan. The entity shall treat such a plan as a defined contribution plan unless the entity will have (either directly, or indirectly through the plan) a legal or constructive obligation either: (a) to pay the employee benefits directly when they fall due; or (b) to pay further amounts if the insurer does not pay all future employee benefits relating to employee service in the current and prior periods. If the entity retains such a legal or constructive obligation, the entity shall treat the plan as a defined benefit plan. 47 The benefits insured by an insurance policy need not have a direct or automatic relationship with the entity s obligation for employee benefits. Post-employment benefit plans involving insurance policies are subject to the same distinction between accounting and funding as other funded plans. 48 Where an entity funds a post-employment benefit obligation by contributing to an insurance policy under which the entity (either directly, indirectly through the plan, through the mechanism for setting future premiums or through a related party relationship with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Ind AS 16). 52 When contributions to a defined contribution plan 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, they shall be discounted using the discount rate specified in paragraph 83. Disclosure 53 An entity shall disclose the amount recognised as an expense for defined contribution plans. 54 Where required by Ind AS 24 an entity discloses information about contributions to defined contribution plans for key management personnel. Post-employment benefits: defined benefit plans 55 Accounting for defined benefit plans is complex because actuarial assumptions are required to measure the obligation and the expense and there is a possibility of actuarial gains and losses. Moreover, the obligations are measured on a discounted basis because they may be settled many years after the employees render the related service. Recognition and measurement 56 Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting entity and from which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net interest on the net defined benefit liability (asset) (see paragraph 130); and (iii) any change in the effect of the asset ceiling (see paragraph 64), excluding amounts included in net interest on the net defined benefit liability (asset). Where an entity has more than one defined benefit plan, the entity applies these procedures for each material plan separately. 58 An entity shall determine the net defined benefit liability (asset) with sufficient regularity that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the end of the reporting period. 59 This Standard encourages, but does not require, an entity to involve a qualified actuary in the measurement of all material post-employment benefit obligations. For practical reasons, an entity may request a qualified actuary to carry out a detailed valuation of the obligation before the end of the reporting period. Nevertheless, the results of that valuation are updated for any material transactions and other material changes in circumstances (including changes in market prices and interest rates) up to the end of the reporting period. 60 In some cases, estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as final salaries, employee turnover and mortality, employee contributions and medical cost trends. 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: (a) to apply an actuarial valuation method (see paragraphs 67 69); (b) to attribute benefit to periods of service (see paragraphs 70 74); and (c) to make actuarial assumptions (see paragraphs 75 98). Actuarial valuation method 67 An entity shall 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. 68 The projected unit credit method (sometimes known as the accrued benefit method pro-rated on service or as the benefit/years of service method) sees each period of service as giving rise to an additional unit of benefit entitlement (see paragraphs 70 74) and measures each unit separately to build up the final obligation (see paragraphs 75 98). Example illustrating paragraph 68 A lump sum benefit is payable on te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igations). An entity 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 that an entity expects to pay in future reporting periods. Actuarial techniques allow an entity to measure that obligation with sufficient reliability to justify recognition of a liability. Examples illustrating paragraph 71 1. A defined benefit plan provides a lump sum benefit of ₹ 100 payable on retirement for each year of service. A benefit of ₹ 100 is attributed to each year. The current service cost 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 repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributed to service before the age of 25 because service before that date does not lead to benefits (conditional or unconditional). A benefit of ₹ 100 is attributed to each subsequent year. 73 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 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 servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reimburses 10 per cent 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 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, gratuity sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther 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 future characteristics of current and former employees (and their dependants) who are eligible for benefits. Demographic assumptions deal with matters such as: (i) mortality (see paragraphs 81 and 82); (ii) rates of employee turnover, disability and early reti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gations (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 risk that future experience may differ from actuarial assumptions. 85 The discount rate reflects the estimated timing of benefit payments. In practice, an entity often achieves this by applying a single weighted average discount rate that reflects the estimated timing and amount of benefit payments and the currency in which the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, seniority, promotion and other relevant factors, such as supply and demand in the employment market. 91 Some defined benefit plans limit the contributions that an entity is required to pay. The ultimate cost of the benefits takes account of the effect of a limit on contributions. The effect of a limit on contributions is determined over the shorter of: (a) the estimated life of the entity; and (b) the estimated life of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 estimates future medical costs on the basis of historical data about the entity s own experience, supplemented where necessary by historical data from other entities, insurance companies, medical providers or other sources. Estimates of future medical costs consider the effect of technological advances, changes in health care utilisation or delivery patterns and changes in the health status of plan participants. 98 The level and frequency of claims is particularly sensit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, discontinuance of an operation or termination or suspension of a plan. 106 Past service cost may be either positive (when benefits are introduced or changed so that the present value of the defined benefit obligation increases) or negative (when benefits are withdrawn or changed so that the present value of the defined benefit obligation decreases). 107 Where an entity reduces benefits payable under an existing defined benefit plan and, at the same time, increases other benefits payable under the plan for the same employees, the entity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urance 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 deal with the recognition and measurement of reimbursement rights under insurance policies that are not plan assets. Recognition and measurement: plan assets Fair value of plan assets 113 The fair value of any plan assets is deducted from the present value of the defined benefit obligation in determining the deficit or surplus. 114 Plan assets exclude unpaid contributions due from the reporting entity to the fund, as well as any non-transferable financial instruments issued by the entity and held by the fund. Plan assets are reduced by any liabilities of the fund that do not relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimbursement 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 paragraphs 127 130) in other comprehensive income. 121 Other Ind ASs require the inclusion of some employee benefit costs within the cost of assets, such as inventories and property, plant and equipment (see Ind AS 2 and Ind AS 16). Any post-employment benefit costs included in the cost of such assets include the appropriate proportion of the components listed in paragraph 120. 122 Remeasurements of the net defined benefit liability (asset) recognised in other comprehensive income shall not be reclassified to profit or loss in a subsequent period. However, the entity may transfer those amounts recognised in other comprehensive income within equity. 7 [Current service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 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 remeasurement of the net defined benefit liability (asset). ] 11 [ 126 Interest on the effect of the asset ceiling is part of the total change in the effect of the asset ceiling, and is determined by multiplying the effect of the asset ceiling by the discount rate specified in paragraph 123A. An entity shall determine the effect of the asset ceiling 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 on the effect of the asset ceiling for the remainder of the annual reporting period after the plan amendment, curtailment or settlement taking into account any change in the effect of the asset ceiling determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 those established for financial instruments in Ind AS 32, Financial Instruments: Presentation . Current/non-current distinction 133 Some entities distinguish current assets and liabilities from non-current assets and liabilities. This Standard does not specify whether an entity should distinguish current and non-current portions of assets and liabilities arising from post-employment benefits. Components of defined benefit cost 134 Paragraph 120 requires an entity to recognise service cost and net interest on the net defined benefit liability (asset) in profit or loss. This Standard does not specify how an entity should present service cost and net interest on the net defined benefit liability (asset). An entity presents those components in accordance with Ind AS1. Disclosure 135 An entity shall disclose informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution-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 (see paragraph 64). (iii) a description of any other entity s responsibilities for the governance of the plan, for example responsibilities of trustees or of board members of the plan. (b) a description of the risks to which the plan exposes the entity, focused on any unusual, entity specific or plan-specific risks, and of any significant concentrations of risk. For example, if plan assets are invested primarily in one class of investments, eg property, the plan may expose the entity to a concentration of property market risk. (c) a description of any plan amendments, curtailments and settlements. Explanation of amounts in the financial statements 140 An entity shall provide a reconciliation from the opening balance to the closing balance for each of the following, if applicable: (a) the net defined benefit liability (asset), showing separate reconciliations for: (i) plan assets. (ii) the present value of the defined benefit obligation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, longevity swaps etc); (f) investment funds (segregated by type of fund); (g) asset-backed securities; and (h) structured debt. 143 An entity shall disclose the fair value of the entity s own transferable financial instruments held as plan assets, and the fair value of plan assets that are property occupied by, or other assets used by, the entity. 144 An entity shall disclose the significant actuarial assumptions used to determine the present value of the defined benefit obligation (see paragraph 76). Such disclosure shall be in absolute terms (eg as an absolute percentage, and not just as a margin between different percentages and other variables). When an entity provides disclosures in total for a grouping of plans, it shall provide such disclosures in the form of weighted averages or relatively narrow ranges. Amount, timing and uncertainty of future cash flows 145 An entity shall disclose: (a) a sensitivity analysis for each significant actuarial assumption (as disclosed under paragraph 144) as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus and the implications, if any, for the entity. (v) an indication of the level of participation of the entity in the plan compared with other participating entities. Examples of measures that might provide such an indication include the entity s proportion of the total contributions to the plan or the entity s proportion of the total number of active members, retired members, and former members entitled to benefits, if that information is available. Defined benefit plans that share risks between entities under common control 149 If an entity participates in a defined benefit plan that shares risks between entities under common control, it shall disclose: (a) the contractual agreement or stated policy for charging the net defined benefit cost or the fact that there is no such policy. (b) the policy for determining the contribution to be paid by the entity. (c) if the entity accounts for an allocation of the net defined benefit cost as noted in paragraph 41, all the information about the plan as a whole required by paragraphs 135 147. (d) if the entity accounts for the contribution payable for the period as noted in paragraph 41, the information about the plan as a whole required b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 122A) ] (b) net interest on the net defined benefit liability (asset) (see paragraphs 123 126); and (c) remeasurements of the net defined benefit liability (asset) (see paragraphs 127 130). 157 One form of other long-term employee benefit is long-term disability benefit. If the level of benefit depends on the length of service, an obligation arises when the service is rendered. Measurement of that obligation reflects the probability that payment will be required and the 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. Disclosure 158 Although this Standard does not require specific disclosures about other long-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 requires disclosure of employee benefits expense. Termination benefits 159 This Standard deals with termination benefits separately from other employee benefits because the event that gives ris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits or post-employment benefits. Employee benefits provided in accordance with the terms of an employee benefit plan are termination benefits if they both result from an entity s decision to terminate an employee s employment and are not conditional on future service being provided. 164 Some employee benefits are provided regardless of the reason for the employee s departure. The payment of such benefits is certain (subject to any vesting or minimum service requirements) but the timing of their payment is uncertain. Although such benefits are described in some jurisdictions as termination indemnities or termination gratuities, they are post-employment benefits rather than termination benefits, and an entity accounts for them as post-employment benefits. Recognition 165 An entity shall recognise a liability and expense for termination benefits at the earlier of the following dates: (a) when the entity can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits. 166 For termination benefits payable as a result of an employee s decision to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraphs 70 74 relating to the attribution of the benefit to periods of service are not relevant. Example illustrating paragraphs 159 170 Background As a result of a recent acquisition, an entity plans to close a factory in ten months and, at that time, terminate the employment of all of the remaining employees at the factory. Because the entity needs the expertise of the employees at the factory to complete some contracts, it announces a plan of termination as follows. Each employee who stays and renders service until the closure of the factory will receive on the termination date a cash payment of ₹ 30,000. Employees leaving before closure of the factory will receive ₹ 10,000. There are 120 employees at the factory. At the time of announcing the plan, the entity expects 20 of them to leave before closure. Therefore, the total expected cash outflows under the plan are ₹ 3,200,000 (ie 20 ₹ 10,000 + 100 ₹ 30,000). As required by paragraph 160, the entity accounts for benefits provided in exchange for termination of employment as termination benefits and accounts for benefits provided in exchange for services as short-term employee benefits. Termination b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the first annual reporting period that begins on or after 1 April, 2019. ] Appendix A Application Guidance This appendix is an integral part of the Ind AS. It describes the application of paragraphs 92 93 and has the same authority as the other parts of the Ind AS. A1 The accounting requirements for contributions from employees or third parties are illustrated in the diagram below. Appendix B Ind AS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction This Appendix is an integral part of the Ind AS . Background 1 Paragraph 64 of Ind 19 limits the measurement of a net defined benefit asset to the lower of the surplus in the defined benefit plan and the asset ceiling. Paragraph 8 of Ind AS 19 defines the asset ceiling as the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan . Questions have arisen about when refunds or reductions in future contributions should be regarded as available, particularly when a minimum funding requirement exists. 2 Minimum funding requirements exist in many countries to improve the security of the postemployment benefit promi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all not recognise economic benefits from a combination of refunds and reductions in future contributions based on assumptions that are mutually exclusive. 10 In accordance with Ind AS 1, the entity shall disclose information about the key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amount of the net asset or liability recognised in the balance sheet. This might include disclosure of any restrictions on the current realisability of the surplus or disclosure of the basis used to determine the amount of the economic benefit available. The economic benefit available as a refund The right to a refund 11 A refund is available to an entity only if the entity has an unconditional right to a refund: (a) during the life of the plan, without assuming that the plan liabilities must be settled in order to obtain the refund (eg in some jurisdictions, the entity may have a right to a refund during the life of the plan, irrespective of whether the plan liabilities are settled); or (b) assuming the gradual settlement of the plan liabilities over time until all members have left the plan; or (c) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended and shall assume a stable workforce in the future unless the entity makes a reduction in the number of employees covered by the plan. In the latter case, the assumption about the future workforce shall include the reduction. The effect of a minimum funding requirement on the economic benefit available as a reduction in future contributions 18 An entity shall analyse any minimum funding requirement at a given date into contributions that are required to cover (a) any existing shortfall for past service on the minimum funding basis and (b) future service. 19 Contributions to cover any existing shortfall on the minimum funding basis in respect of services already received do not affect future contributions for future service. They may give rise to a liability in accordance with paragraphs 23 26. 20 If there is a minimum funding requirement for contributions relating to future service, the economic benefit available as a reduction in future contributions is the sum of: (a) any amount that reduces future minimum funding requirement contributions for future service because the entity made a prepayment (ie paid the amount before being required to do so); and (b) the estimated future ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 19 and the corresponding International Accounting Standard (IAS) 19, Employee Benefits, and IFRIC 14, IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, issued by the International Accounting Standards Board. Comparison with IAS 19, Employee Benefits, and IFRIC 14 1 Paragraph numbers 25-26 appear as Deleted in IFRIC 14. In order to maintain consistency with paragraph numbers of IFRIC 14, the paragraph numbers are retained in Appendix B of Ind AS 19. 2 [ According to Ind AS 19 the rate to be used to discount post-employment benefit obligation shall be determined by reference to the market yields on government bonds, whereas under IAS 19 , the government bonds can be used only for those currencies where there is no deep market of high quality corporate bonds. However, requirements given in IAS 19 in this regard have been retained with appropriate modifications for currencies other than Indian rupee. ] 3 To illustrate treatment of gratuity subject to ceiling un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations for subsidiaries, associates, joint ventures and branches domiciled outside India. 3. 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 (i) current service cost (see paragraphs 70 74). 4. 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 99 Before determining past service cost, or a gain or loss on settlement, an entity shall remeasure the net defined benefit liability (asset) using the current fair value of plan assets and current actuarial assumptions (including current market interest rates and other current market prices) reflecting the benefits offered under the plan before the plan amendment, curtailment or settlement. 5. Inserted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VIII)] dated 30-03-2019 w.e.f. 01-04-2019 6. 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 (a) service cost (see paragraphs 66 112) in profit or loss; 7. Inserted vide NOTIFICATION No. [F. No. 01/01/2009-CL-V-(Part VIII)] dated 30-03-2019 w.e.f. 01-04-2019 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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