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Short term employee benefits under IFRS

Short term employee benefits under IFRS: Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees. Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service. Post-employment benefits are employee benefits (other than termination benefits) which are payable after the completion of employment.

Post-employment benefit plans are formal or informal arrangements 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.

Short term employee benefits under IFRS

Short term employee benefits under IFRS

Short term employee benefits under IFRS:

Multi-employer plans are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that:

  1. Pool the assets contributed by various entities that are not under common control; and
  2. 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 concerned.

Short term employee benefits under IFRS: Other long-term employee benefits are employee benefits (other than post-employment benefits and termination benefits) that are not due to be settled within 12 months after the end of the period in which the employees render the related service. Termination benefits are employee benefits payable as a result of either:

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  1. An entity’s decision to terminate an employee’s employment before the normal retirement date.
  2. An employee’s decision to accept voluntary redundancy in exchange for those benefits.

Vested employee benefits are employee benefits that are not conditional on future employment. The present value of a defined benefit obligation is the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. Current service cost is the increase in the present value of a defined benefit obligation resulting from employee service in the current period.

Short term employee benefits under IFRS:

Interest cost is the increase during a period in the present value of a defined benefit obligation which arises because the benefits are one period closer to settlement. Plan assets comprise:

  1. Assets held by a long-term employee benefit fund.
  2. Qualifying insurance policies.

Short term employee benefits under IFRS: Assets held by a long-term employee benefit fund are assets (other than non-transferable financial instruments issued by the reporting entity) that:

  1. Are held by an entity (a fund) that is legally separate from the reporting entity and exists solely to pay or fund employee benefits.
  2. Are available to be used only to pay or fund employee benefits, are not available to the reporting entity’s own creditors (even in bankruptcy), and cannot be returned to the reporting entity, unless either:
    1. The remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the reporting entity.
    2. The assets are returned to the reporting entity to reimburse it for employee benefits already paid. A qualifying insurance policy is an insurance policy 1 issued by an insurer that is not a related party (as defined in IAS 24 Related Party Disclosures) of the reporting entity, if the proceeds of the policy:
  3. Can be used only to pay or fund employee benefits under a defined benefit plan; and
  4. Are not available to the reporting entity’s own creditors (even in bankruptcy) and cannot be paid to the reporting entity, unless either:
    1. The proceeds represent surplus assets that are not needed for the policy to meet all the related employee benefit obligations.
    2. The proceeds are returned to the reporting entity to reimburse it for employee benefits already paid. Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction.

Short term employee benefits under IFRS: The return on plan assets is interest, dividends and other revenue derived from the plan assets, together with realised and unrealised gains or losses on the plan assets, less any costs of administering the plan (other than those included in the actuarial assumptions used to measure the defined benefit obligation) and less any tax payable by the plan itself. Actuarial gains and losses comprise:

  1. Experience adjustments.
  2. The effects of changes in actuarial assumptions.

Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits.

Past service cost may be either positive (where benefits are introduced or changed so that the present value of the defined benefit obligation increases) or negative (where existing benefits are changed so that the present value of the defined benefit obligation decreases).

Short-term employee benefits : Short-term employee benefits include items such as:

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1 A qualifying insurance policy is not necessarily an insurance contract, as defined in IFRS 4 Insurance Contracts.

  1. Wages, salaries and social security contributions.
  2. Short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the absences is due to be settled within 12 months after the end of the period in which the employees render the related employee service.
  3. Profit-sharing and bonuses payable within twelve months after the end of the period in which the employees render the related service.
  4. Non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees.

Short term employee benefits under IFRS:

Accounting for short-term employee benefits is generally straightforward because no actuarial assumptions are required to measure the obligation or the cost and there is no possibility of any actuarial gain or loss. Moreover, short-term employee benefit obligations are measured on an undiscounted basis.

Recognition and measurement All short-term employee benefits 10 When an employee has rendered service to an entity during an accounting period, the entity shall recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service:

  1. 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.
  2. As an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset (see, for example, IAS 2 Inventories and IAS 16 Property, Plant and Equipment). Paragraphs 11, 14 and 17 explain how an entity shall apply this requirement to short-term employee benefits in the form of compensated absences and profit-sharing and bonus plans.

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