PAS 19

• PAS 19 prescribes the accounting treatment for Employee Benefits, which are all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment
• Employee benefits are recognized as an expense when employees have rendered service, except if they form part of the cost of another asset
• Employee benefits already earned by employees but not yet paid are recognized as liabilities
• Four categories of Employee Benefits under PAS 19 are: Short-term benefits, Post-employment benefits, Other long-term benefits, and Termination Benefits
• Short-term Employee Benefits are due to be settled within 12 months after the end of the period in which the employees have rendered the related services
• Short-term paid absences include vacation, holiday, maternity, paternity, and sick leaves, which may be accumulating or non-accumulating
• Compensated balances can be accumulating and vesting, accumulating and non-vesting, or non-accumulating
• Profit Sharing and Bonuses are recognized when the entity has a present obligation to pay for them and the cost can be measured reliably
• Post-Employment Benefits are payable after the completion of employment and include Retirement Benefits and other post-employment benefits like insurance or medical care
• Post-Employment Benefit Plans can be formal or informal and can be Defined Contributions Plans (DCP) or Defined Benefit Plans (DBP)
• Accounting for Defined Contribution Plans (DCP) is straightforward since the employer's obligation is limited to the amount agreed to contribute
• Accounting for Defined Benefit Plans (DBP) involves determining the deficit or surplus, and then determining the net defined benefit liability/asset
• Steps in accounting for DBP include determining the defined benefit cost, which consists of service cost, gain or loss on settlement, net interest on the defined liability/asset, actuarial gains and losses, and return on plan assets
• Multi-Employer Plans can be classified as either defined contribution plans or defined benefit plans
• State Plans, like GSIS and SSS, are established by law and operated by the government
• Insured Benefits are EE benefits that are due to be settled beyond 12 months after the end of the period in which the employees have rendered the related service
• Other Long-Term Benefits include long-term compensated absences, jubilee or other long-service benefits, profit-sharing, bonuses, and deferred compensation payable beyond 12 months after the end of the period in which the benefits were earned
• Termination Benefits are provided as a result of either the entity's decision to terminate the employee before the normal retirement date or the employee's decision to accept the employer's offer of benefits in exchange for termination
• Termination Benefits are recognized as a liability and expense at the earlier of specific dates, and their measurement depends on whether they are payable within or beyond 12 months