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Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
Employee benefits ias 19
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Employee benefits ias 19

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  • 1. 0322-3385752 0336-8099762R-1173, AL-NOOR SOCIETY, BLOCK 19, F.B.AREA, KARACHI.
  • 2.  PIPFA STUDENTS INTERMEDIATE FINANCIAL ACCOUNTING PERFORMANCE MEASUREMENT COMPLETION OF SYLLABUS IN 1 MONTH JOIN KHALID AZIZ 0322*3385752 R1173-ALNOOR SOCIETY BLOCK 19 F.B.AREA-KARACHI.
  • 3.  ICAP STUDENTS MODULE B FINANCIAL ACCOUNTING BUSINESS ECONOMICS MODULE D COST ACCOUNTING COMPLETION OF SYLLABUS IN 3 MONTHS JOIN KHALID AZIZ 0322*3385752 R1173, ALNOOR SOCIETY, BLOCK 19. F.B.AREA, KARACHI.
  • 4.  PREVIOUS MICRO ECONOMICS & STATISTICS FINAL MACRO ECONOMICS
  • 5.  PART 1 ACCOUNTING, STATISTICS & ECONOMICS. PART 2 ADVANCED & COST ACCOUNTING, BUSINESS LAW, AUDITING & TAX.
  • 6. 1 STYEAR ACCOUNTING, BUSINESS MATHS & ECONOMICS.2 ND YEAR ACCOUNTING & STATISTICS.
  • 7. ACCOUNTING,ECONOMICS,BUSINESS STUDIES,URDU & PAKSTUDIES.
  • 8.  COMMERCE COACH 0322-3385752 0336-8099762 R-1173, AL-NOOR SOCIETY, BLOCK 19, F.B.AREA, KARACHI.
  • 9.  Related standards IAS 19 Current GAAP comparisons Looking ahead End-of-chapter practice 12
  • 10.  IFRS 2 Share-based payment IAS 24 Related party disclosures 13
  • 11.  Objective and scope Short-term employee benefits Post-employment benefit plans Post-employment benefits: defined contribution plans Post-employment benefits: defined benefit plans Other long-term employee benefits Termination benefits 14
  • 12. Accounting and disclosure requirements foremployee benefits: all forms of considerationgiven by an entity in exchange for employeeservices rendered ◦ Short-term employee benefits ◦ Post-employment benefits ◦ Other long-term employee benefits ◦ Termination benefits 15
  • 13.  Short-term employee benefits – benefits other thantermination benefits that are due to be settled within12 months after the end of the period in which therelated service is rendered Example: ◦ Salaries, wages, social security contributions ◦ Short-term compensated absences such as paid annual and sickness leaves ◦ Profit-sharing and bonuses ◦ Non-monetary benefits such as medical care, housing, etc. 16
  • 14.  Short-term compensated absences: ◦ Recognize a cost and liability = the undiscounted amount of benefits expected to be paid Some benefits accumulate ◦ Accrue as employee provides services (e.g., paid vacation leave) Some do not accrue (e.g., parental leave) ◦ Recognize cost and liability when event occurs that obligates the entity to provide the benefit 17
  • 15.  Profit-sharing and bonus plans: ◦ Recognize cost and liability only when  a legal or constructive obligation exists, and  amount can be reasonably estimated To reasonably estimate, must have one of thefollowing: ◦ plan has formal terms including a formula ◦ amount is known before F/S are authorized for release ◦ past practice provides clear evidence of amount 18
  • 16.  Post-employment benefit plans – formal orinformal arrangements to provide benefits afteremployment, such as pension benefits and post-employment medical care Two types of plan: ◦ defined contribution plan: employer makes specific contributions, employee benefits = whatever has accumulated ◦ defined benefit plan: employer promises to pay a post-employment benefit, if not enough funds have accumulated, employer is responsible for the difference 19
  • 17. 20
  • 18.  - Relatively straightforward - Liability is recognized only for contributionsunpaid at the end of the period - Expense recognized in same period asservices are rendered 21
  • 19.  - Complex - Accounting measures depend on actuarialassumptions far into the future - Obligations are settled many years afterservice is provided by employees – need to taketime value of money into account - Many plans are funded and rely oninvestment returns to grow - Employer underwrites actuarial andinvestment risks 22
  • 20.  Accounting building blocks ◦ Present value of a defined benefit obligation – the discounted present value of the expected future payments required to settle an entity’s obligation resulting from employee service accumulated to date ◦ Plan assets – assets held by the long-term employee benefit fund that exists solely to pay employee benefits as they fall due. 23
  • 21.  Changes in the PV of the defined benefit obligation (DBO) – based onprojected salaries: Present value of the obligation, beginning of period + Current period’s service cost + Interest cost on the outstanding obligation for theperiod +/- Past service costs from plan amendments in the period- - Benefits paid under the plan in the period+/- +/- Actuarial gains (-) and losses (+) in theperiod_______________= = Present value of the obligation, end ofperiod________________ 24
  • 22.  PV of the defined benefit obligation depends on: ◦ actuarial assumptions (mortality rates, employee turnover, dependants) ◦ financial assumptions (discount rate, future salary levels, future medical costs) Discount/interest rate = end-of-period market yield on high-quality corporate bonds with terms that correspond to obligation 25
  • 23.  Current service cost = PV of benefits earned forservice in current period Past service cost (PSC) = change in PV of DBO fromintroducing plan that includes benefits for pastservice or from a change in the benefits payablerelated to past service under existing plan Actuarial gains/losses = effects of changes inactuarial assumptions and experience adjustmentsfor difference between previous estimates and whatactually occurred. 26
  • 24.  Changes in the FV of plan assets: Fair value of plan assets, beginning of period + Contributions from employer/employees in the period +/- Actual return on plan assets in the period - Benefits paid under the plan in the period__________ = Fair value of plan assets, end of period____________ 27
  • 25.  Actual return on plan assets = interest,dividends, other income and realized andunrealized gains and losses on assets held inplan Expected return on plan assets = return usedby actuary in determining funding requirements 28
  • 26.  Benefit cost to recognize each period Current service cost for the period + Interest cost for the period - Expected return on plan assets for the period +/- Actuarial gain (-) or loss(+) amortized in the period +/- Past service cost recognized in the period = Post-employment benefit cost to profit or loss 29
  • 27.  Benefit cost variables taken from ◦ PV of PBO, and ◦ Fund assets ◦ Information in working papers for actuarial gain/loss and PSC  Amortization of actuarial gain/loss – use corridor method  PSC  for vested benefits, expense in period  for unvested benefits, amortize to expense on straight- line basis over average period until vested 30
  • 28.  Actuarial gains/losses: 2 options 1. recognize all actuarial gains/losses in OCI when they occur, and then directly to retained earnings – not through P&L 2. do not recognize/amortize unless accumulated net actuarial gain/loss is significant*; if significant, amortize excess amount to expense over average working lives of employees in plan *significant: if at the first of the period, it is more than 10% of the larger of the beginning of the period PV of PBO and the fund assets 31
  • 29.  Entries: Dr. Employee benefit expense $X Cr. Defined benefit liability $X To record expense and recognize liability. Dr. Defined benefit liability $Y Cr. Cash $Y To record contribution to plan assets. 32
  • 30.  Balance in Defined Benefit Liability on balance sheet can bereconciled to building blocks: Present value of the defined benefit obligation - Fair value of the plan assets = Funded status of the plan +/- Net unrecognized actuarial gains (+) or losses (-) - Unrecognized past service costs = Defined benefit liability 33
  • 31.  Extensive disclosures required ◦ Description of plans and accounting policies ◦ Reconciliation of changes in PV of PBO and fund assets ◦ Reconciliation of B/S account to funded status ◦ Components of and total expense ◦ Information about plan assets and actuarial assumptions, sensitivity analysis, historical data ◦ Best estimate of expected contribution to plan in year after B/S date 34
  • 32.  Examples: ◦ long-term disability benefits, long-service or sabbatical leaves, deferred compensation (>12 months) ◦ similar to post-employment benefits, but with less measurement uncertainty ◦ all aspects recognized in expense in year; no defer and amortize 35
  • 33. 36
  • 34.  Termination benefits – benefits payable as a result of: ◦ ending an employee’s employment before normal retirement date, or ◦ employee accepts voluntary termination in exchange for benefits Recognize liability and expense only when entity isdemonstrably committed to plan. Plan sets out: a) location, function and approximate number of employees being terminated; b) termination benefits to be provided for each job classification or function; and c) when the plan will be implemented Entire cost is expensed when entity is committed to plan 37
  • 35. IAS 19 on IASB current agendaGoal - issue interim standard with significantimprovements by 2011March 2008 Discussion Paper (DP) issued –limited scopeExposure Draft expected in late 2009After DP issues resolved, second phase ofproject will begin 38
  • 36.  Tentative decisions made by IAS Board ◦ All changes in plan assets and benefit obligation should be recognized when incurred ◦ No need to separately recognize expected return on plan assets ◦ All past service cost should be recognized in expense when plan amended ◦ Variety of presentation approaches for components of defined benefit expense – IASB seeking input ◦ New definitions needed for post-employment benefits and defined benefit plans 39

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