Accounting

Other Long-Term Employee Benefits As Per IAS 19

Other Long-Term Employee Benefits As Per IAS 19: Long-term employee benefits are benefits for services provided in the current period that will not be paid until more than 12 months after the end of the period. Long-term employee benefits that are provided to employees during the period of their employment. A common form of long-term employee benefits is long service leave, which is a paid absence after the employee has provided a long period of service, such as 3 months of paid leave after 10 years of continuous employment.

Long service leave accrues to employees as they provide service to the entity. The principle adopted by IAS 19 is that an obligation arises for long service leave when the employees provide services to the employer, even though the employees may have no legal entitlement to the leave. Thus, a liability is recognized for long service leave as it accrues. Long service leave payments reduce the long service leave liability.

Accounting for other long-term employee benefits is similar to accounting for defined-benefit post-employment plans except that the effects of re-measurements are not recognized in other comprehensive income. Thus the net liability (asset) for long-term employee benefits is measured as the net of the present value of the defined benefit obligation at the reporting date minus the fair value at the reporting date of plan assets out of which the obligations are to be settled directly, subject to adjustment of a net asset for the effects of an asset ceiling, if applicable.

In some countries it is extremely unusual to establish plan assets to provide for the payment of long service leave benefits to employees. Thus, the accounting treatment for long service leave benefits is usually confined to the recognition of the present value of the obligation measured in accordance with the projected unit credit method.

The projected unit credit method measures the obligation for long-term employee benefits by calculating the present value of the expected future payments that will result from employee services provided to date. The measurement of the present value of the obligation for long service leave payments is complicated by the need to make several estimates.

These include estimation of when the leave will be taken, projected salary levels, and the proportion of employees who will continue in the entity’s employment long enough to become entitled to long service leave. Actuarial advice is often used in the measurement of long service leave obligations.

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