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IFRS amendments to IAS 19

IFRS amendments to IAS 19

IFRS amendments to IAS 19:In April 2001 the International Accounting Standards Board (the Board) adopted IAS 19 Employee Benefits, which had originally been issued by the International Accounting
Standards Committee in February 1998. IAS 19 Employee Benefits replaced IAS 19 Accounting for Retirement Benefits in the Financial Statements of Employers (issued in January 1983). IAS 19 was further amended in 1993 and renamed as IAS 19 Retirement Benefit Costs.

The Board amended the accounting for multi-employer plans and group plans in December 2004. In June 2011 the Board revised IAS 19; this included eliminating an option that allowed an entity to defer the recognition of changes in net defined benefit liability and amending some of the disclosure requirements for defined benefit plans and multi-employer plans.

In November 2013 IAS 19 was amended by Defined Benefit Plans: Employee Contributions (Amendments to IAS 19). The amendments simplified the requirements for contributions from employees or third parties to a defined benefit plan, when those contributions are applied to a simple contributory plan that is linked to service.
Other Standards have made minor consequential amendments to IAS 19, including Annual Improvements to IFRSs 2012–2014 Cycle (issued September 2014).

IFRS amendments to IAS 19

IFRS amendments to IAS 19

IFRS amendments to IAS 19

International Accounting Standard 19 Employee Benefits (IAS 19) is set out in paragraphs 1–177 and Appendices A–B. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 19 should be read in the context of its objective and the Basis for Conclusions, the Preface to International Financial Reporting Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.

IFRS amendments to IAS 19

IAS 19 Employee Benefits prescribes the accounting and disclosure by employers for employee benefits. The Standard does not deal with reporting by employee benefit plans (see IAS 26 Accounting and Reporting by Retirement Benefit Plans).

IFRS amendments to IAS 19

The Standard identifies four categories of employee benefits:

  1. 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):
    wages, salaries and social security contributions, paid annual leave and
    paid sick leave, profit-sharing and bonuses and non-monetary benefits
    (such as medical care, housing, cars and free or subsidised goods or
    services) for current employees.
  2.  post-employment benefits such as retirement benefits (eg pensions and
    lump sum payments on retirement), post-employment life insurance and
    post-employment medical care.
  3. Other long-term employee benefits, such as long-service leave or
    sabbatical leave, jubilee or other long-service benefits, long-term
    disability benefits.
  4. termination benefits.

The Standard requires an entity to recognise short-term employee benefits when
an employee has rendered service in exchange for those benefits.

IFRS amendments to IAS 19

Post-employment benefit plans are classified as either defined contribution plans or defined benefit plans. The Standard gives specific guidance on the classification of multi-employer plans, state plans and plans with insured benefits.

IFRS amendments to IAS 19

Under defined contribution plans, 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.
The Standard requires an entity to recognise contributions to a defined contribution plan when an employee has rendered service in exchange for those contributions.

IFRS amendments to IAS 19

All other post-employment benefit plans are defined benefit plans. Defined benefit plans may be unfunded, or they may be wholly or partly funded.

The Standard requires an entity:

  1. to account not only for its legal obligation, but also for any constructive
    obligation that arises from the entity’s practices.
  2. to determine the present value of defined benefit obligations and the fair
    value of any plan assets 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.
  3. to use the projected unit credit method to measure its obligations and
    costs.
  4. to attribute benefit to periods of service under the plan’s benefit
    formula, unless an employee’s service in later years will lead to a
    materially higher level of benefit than in earlier years.
  5.  to use unbiased and mutually compatible actuarial assumptions about
    demographic variables (such as employee turnover and mortality) and
    financial variables (such as future increases in salaries, changes in
    medical costs and particular changes in state benefits). Financial
    assumptions should be based on market expectations, at the end of the
    reporting period, for the period over which the obligations are to be
    settled.
  6. to determine the discount rate by reference to market yields at the end of
    the reporting period on high quality corporate bonds (or, for currencies
    in which there is no deep market in such high quality corporate bonds,
    government bonds denominated in that currency) of a currency and
    term consistent with the currency and term of the post-employment
    benefit obligations.
  7. to deduct the fair value of any plan assets from the carrying amount of
    the obligation in order to determine the net defined benefit liability
    (asset). Some reimbursement rights that do not qualify as plan assets are
    treated in the same way as plan assets, except that they are presented as
    a separate asset, rather than as a deduction from the obligation.
  8. to limit the carrying amount of a net defined benefit asset so that it does
    not exceed the economic benefits available in the form of refunds from
    the plan or reductions in future contributions to the plan.

    1.  to recognise all changes in the net defined benefit liability (asset) when
      they occur, as follows:
    2.  service cost and net interest in profit or loss; and
    3.  remeasurements in other comprehensive income.

IFRS amendments to IAS 19

Employee benefits other than short-term employee benefits, post-employment benefits and termination benefits are other long-term employee benefits. For other long-term employee benefits, the Standard requires the same recognition and measurement as for post-employment benefits but all changes in the
carrying amount of liabilities for other long-term employment benefits are recognised in profit or loss. The Standard does not require specific disclosures about other long-term employee benefits.

IFRS amendments to IAS 19

Termination benefits are employee benefits payable as a result of either an entity’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of employment. An entity is required to recognise
termination benefits at the earlier of when the entity can no longer withdraw an offer of those benefits and when it recognises any related restructuring costs.

IFRS amendments to IAS 19

The objective of this Standard is to prescribe the accounting and disclosure for
employee benefits. The Standard requires an entity to recognise:

  1. a liability when an employee has provided service in exchange for
    employee benefits to be paid in the future.
  2. an expense when the entity consumes the economic benefit arising from
    service provided by an employee in exchange for employee benefits.

IFRS amendments to IAS 19

This Standard shall be applied by an employer in accounting for all employee benefits, except those to which IFRS 2 Share-based Payment applies.
This Standard does not deal with reporting by employee benefit plans (see IAS 26 Accounting and Reporting by Retirement Benefit Plans).

IFRS amendments to IAS 19
The employee benefits to which this Standard applies include those provided:

  1. under formal plans or other formal agreements between an entity and
    individual employees, groups of employees or their representatives.
  2. under legislative requirements, or through industry arrangements,
    whereby entities are required to contribute to national, state, industry or
    other multi-employer plans.
  3. 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.

IFRS amendments to IAS 19

Employee benefits include:

  1. 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:

    1.  wages, salaries and social security contributions.
    2. paid annual leave and paid sick leave.
    3. profit-sharing and bonuses.
    4. non-monetary benefits (such as medical care, housing, cars and.
      free or subsidised goods or services) for current employees

IFRS amendments to IAS 19
post-employment benefits, such as the following:

  1. retirement benefits (eg pensions and lump sum payments on
    retirement).
  2. other post-employment benefits, such as post-employment life
    insurance and post-employment medical care;
  3. other long-term employee benefits, such as the following:
  4. long-term paid absences such as long-service leave or sabbatical
    leave

    1. jubilee or other long-service benefits.
    2.  long-term disability benefits.
  5. termination benefits.

IFRS amendments to IAS 19

Employee benefits include benefits provided either to employees or to their
dependants or beneficiaries and may be settled by payments (or the provision of
goods or services) made either directly to the employees, to their spouses,
children or other dependants or to others, such as insurance companies.

IFRS amendments to IAS 19

An employee may provide services to an entity on a full-time, part-time,
permanent, casual or temporary basis. For the purpose of this Standard,
employees include directors and other management personnel.

IFRS amendments to IAS 19

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