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Questions and Answers
What is the primary difference between the accounting for post-employment benefits and other long-term employee benefits under PAS 19?
What type of employee benefit is provided in exchange for the termination of an employee's employment?
Which of the following is an example of a long-term paid absence?
What is the primary purpose of PAS 19?
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Which of the following is not a characteristic of termination benefits?
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What is the main difference between profit sharing and bonuses?
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Under PAS 19, which employee benefits are recognized as an expense in the income statement?
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What is the accounting treatment for long-term disability benefits under PAS 19?
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What is the primary reason for recognizing termination benefits as an expense?
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Which of the following is a long-term employee benefit that is not a type of post-employment benefit?
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Study Notes
Employee Benefits
- Employee benefits are forms of consideration given to an entity in exchange for services rendered by employees or for the termination of employment.
- Includes: short-term employee benefits, post-employment benefits, other long-term employee benefits, and termination benefits.
Short-Term Employee Benefits
- Include: salaries, wages, social security contributions, short-term compensated or paid absences, profit sharing, and bonuses payable within 12 months.
- Accounting procedures:
- Unpaid short-term employee benefits at the end of the accounting period are recognized as accrued expense.
- Any short-term benefits paid in advance are recognized as prepayment.
Short-Term Compensated or Paid Absences
- Accumulating paid absences: entitlement for leaves that can be carried forward and used in future periods if not used in full.
- Non-accumulating absences: not carried forward.
- Vesting: employees are entitled to a cash payment for unused entitlement on leaving the entity.
- Non-vesting: employees are not entitled to a cash payment for unused entitlement on leaving the entity.
Post-Employment Benefits
- Employee benefits payable upon completion of employment, excluding termination benefits and short-term benefits.
- Includes: retirement benefits, post-employment life insurance, post-employment medical care, and defined contribution plans.
Defined Contribution Plan
- A post-employment benefit plan where an entity pays fixed contributions into a separate entity (a fund).
- Accounting procedures:
- Recognize the contribution payable to a defined contribution plan as a liability (accrued expense).
- Recognize excess contribution as an asset (prepaid expense) if it will lead to a reduction in future payments or a cash refund.
Defined Benefit Plan
- A plan where an entity's obligation is to provide the agreed benefits to current and former employees.
- Actuarial risk and investment risk fall on the entity.
- Components:
- Plan assets
- Service cost
- Net interest on the net defined benefit liability (asset)
- Remeasurements of the net defined benefit liability (asset)
Remeasurements of Net Defined Benefit Liability (Asset)
- Include: actuarial gains and losses, return on plan assets, and change in the effect of the asset ceiling.
Other Long-Term Employee Benefits
- Employee benefits other than short-term employee benefits, post-employment benefits, and termination benefits.
- PAS 19 requires a simplified method of accounting, similar to post-employment benefits, except that remeasurements are not recognized in other comprehensive income.
Termination Benefits
- Employee benefits provided in exchange for the termination of an employee's employment.
- Can be due to 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 termination of employment.
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Description
Test your knowledge on employee benefits, including short-term benefits, post-employment benefits, and termination benefits. Learn about salaries, wages, social security contributions, and more. This quiz is based on the CFAS Course Module 26.
