Employee Benefits

Indian Accounting Standard (Ind AS) 19

Employee Benefits

Contents
Paragraphs
OBJECTIVE
SCOPE 1–6
DEFINITIONS 7
SHORT-TERM EMPLOYEE BENEFITS 8–23
Recognition and measurement 10–22
All short-term employee benefits 10
Short-term compensated absences 11–16
Profit-sharing and bonus plans 17–22
Disclosure 23
POST-EMPLOYMENT BENEFITS:
DISTINCTION BETWEEN DEFINED CONTRIBUTION
PLANS AND DEFINED BENEFIT PLANS 24–42
Multi-employer plans 29–33
Defined benefit plans that share risks between
various entities under common control 34–34B
State plans 36–38
Insured benefits 39–42
POST-EMPLOYMENT BENEFITS: DEFINED
CONTRIBUTION PLANS 43–47
Recognition and measurement 44–45
Disclosure 46–47
POST-EMPLOYMENT BENEFITS: DEFINED BENEFIT PLANS 48–119

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Recognition and measurement 49–62

Accounting for the constructive obligation 52–53
Balance sheet 54–60
Profit or loss 61–62
Recognition and measurement: present value of defined
benefit obligations and current service cost 63–101
Actuarial valuation method 64–66
Attributing benefit to periods of service 67–71
Actuarial assumptions 72–77
Actuarial assumptions: discount rate 78–82
Actuarial assumptions: salaries, benefits and medical costs 83–91
Actuarial gains and losses 92–95
Past service cost 96–101
Recognition and measurement: plan assets 102–107
Fair value of plan assets 102–104
Reimbursements 104A–104D
Return on plan assets 105–107
Business combinations 108
Curtailments and settlements 109–115
Presentation 116–119
Offset 116–117
Current/non-current distinction 118
Financial components of post-employment benefit costs 119
DISCLOSURE 120–125
OTHER LONG-TERM EMPLOYEE BENEFITS 126–131
Recognition and measurement 128–130
Disclosure 131
TERMINATION BENEFITS 132–143
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 Employee Benefits

Recognition 133–138
Measurement 139–140
Disclosure 141–143
APPENDICES
A Ind AS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
B Illustrative example
C Illustrative disclosures
D Illustration of the application of paragraph 58A
E References to matters contained in other Indian Accounting
Standards
1 Comparison with IAS 19, Employee Benefits

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Indian Accounting Standards

Indian Accounting Standard (Ind AS) 19

Employee Benefits

(This Indian Accounting Standard includes paragraphs set in bold type

and plain type, which have equal authority. Paragraphs in bold type
indicate the main principles.)

Objective
The objective of this Standard is to prescribe the accounting and
disclosure for employee benefits. The Standard requires an entity to
recognise:

(a) a liability when an employee has provided service in exchange for

employee benefits to be paid in the future; and
(b) an expense when the entity consumes the economic benefit
arising from service provided by an employee in exchange
for employee benefits.

Scope
1 This Standard shall be applied by an employer in accounting
for all employee benefits, except those to which Ind AS 102 Share-
based Payment applies.

2 This Standard does not deal with reporting by employee benefit

plans.

3 The employee benefits to which this Standard applies include

those provided:

(a) under formal plans or other formal agreements between an

entity and individual employees, groups of employees or
their representatives;

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 Employee Benefits

(b) under legislative requirements, or through industry

arrangements, whereby entities are required to contribute
to national, state, industry or other multi-employer plans; or
(c) by those informal practices that give rise to a constructive
obligation. Informal practices give rise to a constructive
obligation where the entity has no realistic alternative but
to pay employee benefits. An example of a constructive
obligation is where a change in the entity’s informal practices
would cause unacceptable damage to its relationship with
employees.
4 Employee benefits include:

(a) short-term employee benefits, such as wages, salaries and

social security contributions, paid annual leave and paid
sick leave, profit-sharing and bonuses (if payable within
twelve months of the end of the period) and non-monetary
benefits (such as medical care, housing, cars and free or
subsidised goods or services) for current employees;
(b) post-employment benefits such as pensions, other retirement
benefits, post-employment life insurance and post-
employment medical care;
(c) other long-term employee benefits, including long-service
leave or sabbatical leave, jubilee or other long-service
benefits, long-term disability benefits and, if they are not
payable wholly within twelve months after the end of the
period, profit-sharing, bonuses and deferred compensation;
and
(d) termination benefits.

Because each category identified in (a)–(d) above has different

characteristics, this Standard establishes separate requirements for each
category.

5 Employee benefits include benefits provided to either employees

or their dependants and may be settled by payments (or the provision
of goods or services) made either directly to the employees, to their
spouses, children or other dependants or to others, such as insurance
companies.
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6 An employee may provide services to an entity on a full-time,

part-time, permanent, casual or temporary basis. For the purpose of
this Standard, employees include directors and other management
personnel.

Definitions
7 The following terms are used in this Standard with the
meanings specified:

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 twelve 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.

Multi-employer plans are defined contribution plans (other than state

plans) or defined benefit plans (other than state plans) that:

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(a) pool the assets contributed by various entities that are

not under common control; and
(b) 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.

Other long-term employee benefits are employee benefits (other than

post-employment benefits and termination benefits) that are not
due to be settled within twelve 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:

(a) an entity’s decision to terminate an employee’s

employment before the normal retirement date; or
(b) 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.

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.

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Plan assets comprise:

(a) assets held by a long-term employee benefit fund; and

(b) qualifying insurance policies.

Assets held by a long-term employee benefit fund are assets (other

than non-transferable financial instruments issued by the reporting
entity) that:

(a) are held by an entity (a fund) that is legally separate

from the reporting entity and exists solely to pay or
fund employee benefits; and
(b) 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:
(i) the remaining assets of the fund are sufficient to
meet all the related employee benefit obligations
of the plan or the reporting entity; or
(ii) the assets are returned to the reporting entity to
reimburse it for employee benefits already paid.

A qualifying insurance policy is an insurance policy* issued by an

insurer that is not a related party (as defined in Ind AS 24 Related
Party Disclosures ) of the reporting entity, if the proceeds of the
policy:

(a) can be used only to pay or fund employee benefits under

a defined benefit plan; and
(b) are not available to the reporting entity’s own creditors
(even in bankruptcy) and cannot be paid to the reporting
entity, unless either:
(i) the proceeds represent surplus assets that are not
needed for the policy to meet all the related
employee benefit obligations; or
* A qualifying insurance policy is not necessarily an insurance contract, as
defined in IND AS 104 Insurance Contracts.

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 Employee Benefits

(ii) 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.

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:

(a) experience adjustments (the effects of differences

between the previous actuarial assumptions and what
has actually occurred); and
(b) 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 (when benefits are introduced
or changed so that the present value of the defined benefit
obligation increases) or negative (when existing benefits are
changed so that the present value of the defined benefit obligation
decreases).

Short-term employee benefits

8 Short-term employee benefits include items such as:

(a) wages, salaries and social security contributions;

(b) short-term compensated absences (such as paid annual
leave and paid sick leave) where the compensation for the

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absences is due to be settled within twelve months after

the end of the period in which the employees render the
related employee service;
(c) profit-sharing and bonuses payable within twelve months
after the end of the period in which the employees render
the related service; and
(d) non-monetary benefits (such as medical care, housing, cars and
free or subsidised goods or services) for current employees.

9 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 bene its

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:

(a) 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; and
(b) as an expense, unless another Standard requires or
permits the inclusion of the benefits in the cost of an
asset (see, for example, Ind AS 2 Inventories and Ind AS
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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Short-term compensated absences

11 An entity shall recognise the expected cost of short-term

employee benefits in the form of compensated absences under
paragraph 10 as follows:

(a) in the case of accumulating compensated absences,

when the employees render service that increases their
entitlement to future compensated absences; and
(b) in the case of non-accumulating compensated absences,
when the absences occur.

12 An entity may compensate employees for absence for various

reasons including vacation, sickness and short-term disability, maternity
or paternity, jury service and military service. Entitlement to compensated
absences falls into two categories:

(a) accumulating; and

(b) non-accumulating.

13 Accumulating compensated absences are those that are carried

forward and can be used in future periods if the current period’s
entitlement is not used in full. Accumulating compensated absences
may be either vesting (in other words, employees are entitled to a cash
payment for unused entitlement on leaving the entity) or non-vesting
(when employees are not entitled to a cash payment for unused
entitlement on leaving). An obligation arises as employees render service
that increases their entitlement to future compensated absences. The
obligation exists, and is recognised, even if the compensated absences
are non-vesting, although the possibility that employees may leave
before they use an accumulated non-vesting entitlement affects the
measurement of that obligation.

14 An entity shall measure the expected cost of accumulating

compensated absences as the additional amount that the entity
expects to pay as a result of the unused entitlement that has
accumulated at the end of the reporting period.

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Indian Accounting Standards

15 The method specified in the previous paragraph measures the

obligation at the amount of the additional payments that are expected
to arise solely from the fact that the benefit accumulates. In many cases,
an entity may not need to make detailed computations to estimate that
there is no material obligation for unused compensated absences. For
example, a sick leave obligation is likely to be material only if there is a
formal or informal understanding that unused paid sick leave may be
taken as paid vacation.

Example illustrating paragraphs 14 and 15

An entity has 100 employees, who are each entitled to five working
days of paid sick leave for each year. Unused sick leave may be
carried forward for one calendar year. Sick leave is taken first out of
the current year’s entitlement and then out of any balance brought
forward from the previous year (a LIFO basis). At 30 December 20X1,
the average unused entitlement is two days per employee. The entity
expects, based on past experience which is expected to continue,
that 92 employees will take no more than five days of paid sick leave
in 20X2 and that the remaining eight employees will take an average
of six and a half days each.

The entity expects that it will pay an additional 12 days of sick pay as
a result of the unused entitlement that has accumulated at 31
December 20X1 (one and a half days each, for eight employees).
Therefore, the entity recognises a liability equal to 12 days of sick
pay.

16 Non-accumulating compensated absences do not carry forward:

they lapse if the current period’s entitlement is not used in full and do
not entitle employees to a cash payment for unused entitlement on
leaving the entity. This is commonly the case for sick pay (to the extent
that unused past entitlement does not increase future entitlement),
maternity or paternity leave and compensated absences for jury service
or military service. An entity recognises no liability or expense until the
time of the absence, because employee service does not increase the
amount of the benefit.

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 Employee Benefits

Profit-sharing and bonus plans

17 An entity shall recognise the expected cost of profit-sharing

and bonus payments under paragraph 10 when, and only when:

(a) the entity has a present legal or constructive obligation

to make such payments as a result of past events; and
(b) a reliable estimate of the obligation can be made.

A present obligation exists when, and only when, the entity has no
realistic alternative but to make the payments.

18 Under some profit-sharing plans, employees receive a share of

the profit only if they remain with the entity for a specified period. Such
plans create a constructive obligation as employees render service that
increases the amount to be paid if they remain in service until the end
of the specified period. The measurement of such constructive
obligations reflects the possibility that some employees may leave
without receiving profit-sharing payments.

Example illustrating paragraph 18

A profit-sharing plan requires an entity to pay a specified proportion

of its profit for the year to employees who serve throughout the year.
If no employees leave during the year, the total profit-sharing payments
for the year will be 3% of profit. The entity estimates that staff turnover
will reduce the payments to 2.5% of profit.

The entity recognises a liability and an expense of 2.5% of profit .

19 An entity may have no legal obligation to pay a bonus.

Nevertheless, in some cases, an entity has a practice of paying bonuses.
In such cases, the entity has a constructive obligation because the
entity has no realistic alternative but to pay the bonus. The measurement
of the constructive obligation reflects the possibility that some employees
may leave without receiving a bonus.

20 An entity can make a reliable estimate of its legal or constructive

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obligation under a profit-sharing or bonus plan when, and only when:

(a) the formal terms of the plan contain a formula for

determining the amount of the benefit;
(b) the entity determines the amounts to be paid before the
financial statements are approved for issue; or
(c) past practice gives clear evidence of the amount of the
entity’s constructive obligation.

21 An obligation under profit-sharing and bonus plans results from

employee service and not from a transaction with the entity’s owners.
Therefore, an entity recognises the cost of profit-sharing and bonus
plans not as a distribution of profit but as an expense.

22 If profit-sharing and bonus payments are not due wholly within

twelve months after the end of the period in which the employees render
the related service, those payments are other long-term employee
benefits (see paragraphs 126–131).

Disclosure
23 Although this Standard does not require specific disclosures about
short-term employee benefits, other Standards may require disclosures.
For example, Ind AS 24 requires disclosures about employee benefits
for key management personnel. Ind AS 1 Presentation of Financial
Statements requires disclosure of employee benefits expense.

Post-employment benefits: distinction between

defined contribution plans and defined benefit
plans
24 Post-employment benefits include, for example:

(a) retirement benefits, such as pensions; and

(b) other post-employment benefits, such as post-employment
life insurance and post-employment medical care.
Arrangements whereby an entity provides post-employment benefits are

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post-employment benefit plans. An entity applies this Standard to all

such arrangements whether or not they involve the establishment of a
separate entity to receive contributions and to pay benefits.

25 Post-employment benefit plans are classified as either defined

contribution plans or defined benefit plans, depending on the economic
substance of the plan as derived from its principal terms and conditions.
Under defined contribution plans:

(a) the entity’s legal or constructive obligation is limited to the

amount that it agrees to contribute to the fund. Thus, the
amount of the post-employment benefits received by the
employee is determined by the amount of contributions paid
by an entity (and perhaps also the employee) to a post-
employment benefit plan or to an insurance company,
together with investment returns arising from the
contributions; and
(b) in consequence, actuarial risk (that benefits will be less
than expected) and investment risk (that assets invested
will be insufficient to meet expected benefits) fall on the
employee.

26 Examples of cases where an entity’s obligation is not limited to

the amount that it agrees to contribute to the fund are when the entity
has a legal or constructive obligation through:

(a) a plan benefit formula that is not linked solely to the amount
of contributions;
(b) a guarantee, either indirectly through a plan or directly, of a
specified return on contributions; or
(c) those informal practices that give rise to a constructive
obligation. For example, a constructive obligation may arise
where an entity has a history of increasing benefits for
former employees to keep pace with inflation even where
there is no legal obligation to do so.

27 Under defined benefit plans:

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Indian Accounting Standards

(a) the entity’s obligation is to provide the agreed benefits to

current and former employees; and
(b) actuarial risk (that benefits will cost more than expected)
and investment risk fall, in substance, on the entity. If
actuarial or investment experience are worse than expected,
the entity’s obligation may be increased.

28 Paragraphs 29–42 below explain the distinction between defined

contribution plans and defined benefit plans in the context of multi-
employer plans, state plans and insured benefits.

Multi-employer plans

29 An entity shall classify a multi-employer plan as a defined

contribution plan or a defined benefit plan under the terms of the
plan (including any constructive obligation that goes beyond the
formal terms). Where a multi-employer plan is a defined benefit
plan, an entity shall:

(a) account for its proportionate share of the defined benefit

obligation, plan assets and cost associated with the plan
in the same way as for any other defined benefit plan;
and
(b) disclose the information required by paragraph 120A.

30 When sufficient information is not available to use defined

benefit accounting for a multi-employer plan that is a defined benefit
plan, an entity shall:

(a) account for the plan under paragraphs 44–46 as if it

were a defined contribution plan;
(b) disclose:
(i) the fact that the plan is a defined benefit plan;
and

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(ii) the reason why sufficient information is not

available to enable the entity to account for the
plan as a defined benefit plan; and
(c) to the extent that a surplus or deficit in the plan may
affect the amount of future contributions, disclose in
addition:
(i) any available information about that surplus or
deficit;
(ii) the basis used to determine that surplus or deficit;
and
(iii) the implications, if any, for the entity.

31 One example of a defined benefit multi-employer plan is one

where:

(a) the plan is financed on a pay-as-you-go basis such that:

contributions are set at a level that is expected to be
sufficient to pay the benefits falling due in the same period;
and future benefits earned during the current period will be
paid out of future contributions; and
(b) employees’ benefits are determined by the length of their
service and the participating entities have no realistic means
of withdrawing from the plan without paying a contribution
for the benefits earned by employees up to the date of
withdrawal. Such a plan creates actuarial risk for the entity:
if the ultimate cost of benefits already earned at the end of
the reporting period is more than expected, the entity will
have to either increase its contributions or persuade
employees to accept a reduction in benefits. Therefore, such
a plan is a defined benefit plan.

32 Where sufficient information is available about a multi-employer

plan which is a defined benefit plan, an entity accounts for its
proportionate share of the defined benefit obligation, plan assets and
post-employment benefit cost associated with the plan in the same way
as for any other defined benefit plan. However, in some cases, an
entity may not be able to identify its share of the underlying financial

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Indian Accounting Standards

position and performance of the plan with sufficient reliability for

accounting purposes. This may occur if:

(a) the entity does not have access to information about the
plan that satisfies the requirements of this Standard; or
(b) the plan exposes the participating entities to actuarial risks
associated with the current and former employees of other
entities, with the result that there is no consistent and
reliable basis for allocating the obligation, plan assets and
cost to individual entities participating in the plan.

In those cases, an entity accounts for the plan as if it were a defined

contribution plan and discloses the additional information required by
paragraph 30.

32A There may be a contractual agreement between the multi-

employer plan and its participants that determines how the surplus in
the plan will be distributed to the participants (or the deficit funded). A
participant in a multi-employer plan with such an agreement that
accounts for the plan as a defined contribution plan in accordance with
paragraph 30 shall recognise the asset or liability that arises from the
contractual agreement and the resulting income or expense in profit or
loss.

Example illustrating paragraph 32A

An entity participates in a multi-employer defined benefit plan that

does not prepare plan valuations on an Ind AS 19 basis. It therefore
accounts for the plan as if it were a defined contribution plan. A non-
Ind AS 19 funding valuation shows a deficit of Rs 100 million in the
plan. The plan has agreed under contract a schedule of contributions
with the participating employers in the plan that will eliminate the
deficit over the next five years. The entity’s total contributions under
the contract are Rs 8 million.

The entity recognises a liability for the contributions adjusted for the
time value of money and an equal expense in profit or loss .

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32B Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets

requires an entity to disclose information about some contingent
liabilities. In the context of a multi-employer plan, a contingent liability
may arise from, for example:

(a) actuarial losses relating to other participating entities

because each entity that participates in a multi-employer
plan shares in the actuarial risks of every other participating
entity; or
(b) any responsibility under the terms of a plan to finance any
shortfall in the plan if other entities cease to participate.

33 Multi-employer plans are distinct from group administration plans.

A group administration plan is merely an aggregation of single employer
plans combined to allow participating employers to pool their assets for
investment purposes and reduce investment management and
administration costs, but the claims of different employers are segregated
for the sole benefit of their own employees. Group administration plans
pose no particular accounting problems because information is readily
available to treat them in the same way as any other single employer
plan and because such plans do not expose the participating entities to
actuarial risks associated with the current and former employees of
other entities. The definitions in this Standard require an entity to classify
a group administration plan as a defined contribution plan or a defined
benefit plan in accordance with the terms of the plan (including any
constructive obligation that goes beyond the formal terms).

Defined benefit plans that share risks between various

entities under common control

34 Defined benefit plans that share risks between various entities

under common control, for example, a parent and its subsidiaries, are
not multi-employer plans.

34A An entity participating in such a plan shall obtain information

about the plan as a whole measured in accordance with Ind AS 19 on
the basis of assumptions that apply to the plan as a whole. If there is a
contractual agreement or stated policy for charging the net defined

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Indian Accounting Standards

benefit cost for the plan as a whole measured in accordance with Ind
AS 19 to individual group entities, the entity shall, in its separate or
individual financial statements, recognise the net defined benefit cost
so charged. If there is no such agreement or policy, the net defined
benefit cost shall be recognised in the separate or individual financial
statements of the group entity that is legally the sponsoring employer
for the plan. The other group entities shall, in their separate or individual
financial statements, recognise a cost equal to their contribution payable
for the period.

34B Participation in such a plan is a related party transaction for

each individual group entity. An entity shall therefore, in its separate or
individual financial statements, make the following disclosures:

(a) the contractual agreement or stated policy for charging the

net defined benefit cost or the fact that there is no such
policy.
(b) the policy for determining the contribution to be paid by the
entity.
(c) if the entity accounts for an allocation of the net defined
benefit cost in accordance with paragraph 34A, all the
information about the plan as a whole in accordance with
paragraphs 120-121.
(d) if the entity accounts for the contribution payable for the
period in accordance with paragraph 34A, the information
about the plan as a whole required in accordance with
paragraphs 120A(b) –(e), (j), (n), (o), (q) and 121. The other
disclosures required by paragraph 120A, do not apply.

35 [Refer to Appendix 1]

State plans

36 An entity shall account for a state plan in the same way as

for a multi-employer plan (see paragraphs 29 and 30).

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37 State plans are established by legislation to cover all entities (or

all entities in a particular category, for example, a specific industry)
and are operated by national or local government or by another body
(for example, an autonomous agency created specifically for this
purpose) which is not subject to control or influence by the reporting
entity. Some plans established by an entity provide both compulsory
benefits which substitute for benefits that would otherwise be covered
under a state plan and additional voluntary benefits. Such plans are not
state plans.

38 State plans are characterised as defined benefit or defined

contribution in nature based on the entity’s obligation under the plan.
Many state plans are funded on a pay-as-you-go basis: contributions
are set at a level that is expected to be sufficient to pay the required
benefits falling due in the same period; future benefits earned during
the current period will be paid out of future contributions. Nevertheless,
in most state plans, the entity has no legal or constructive obligation to
pay those future benefits: its only obligation is to pay the contributions
as they fall due and if the entity ceases to employ members of the state
plan, it will have no obligation to pay the benefits earned by its own
employees in previous years. For this reason, state plans are normally
defined contribution plans. However, in the rare cases when a state
plan is a defined benefit plan, an entity applies the treatment prescribed
in paragraphs 29 and 30.

Insured benefits

39 An entity may pay insurance premiums to fund a post-

employment benefit plan. The entity shall treat such a plan as a
defined contribution plan unless the entity will have (either directly,
or indirectly through the plan) a legal or constructive obligation to
either:

(a) pay the employee benefits directly when they fall due;
or
(b) pay further amounts if the insurer does not pay all future
employee benefits relating to employee service in the
current and prior periods.

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If the entity retains such a legal or constructive obligation, the

entity shall treat the plan as a defined benefit plan.

40 The benefits insured by an insurance contract need not have a

direct or automatic relationship with the entity’s obligation for employee
benefits. Post-employment benefit plans involving insurance contracts
are subject to the same distinction between accounting and funding as
other funded plans.

41 Where an entity funds a post-employment benefit obligation by

contributing to an insurance policy under which the entity (either directly,
indirectly through the plan, through the mechanism for setting future
premiums or through a related party relationship with the insurer) retains
a legal or constructive obligation, the payment of the premiums does
not amount to a defined contribution arrangement. It follows that the
entity:

(a) accounts for a qualifying insurance policy as a plan asset

(see paragraph 7); and
(b) recognises other insurance policies as reimbursement rights
(if the policies satisfy the criteria in paragraph 104A).

42 Where an insurance policy is in the name of a specified plan

participant or a group of plan participants and the entity does not have
any legal or constructive obligation to cover any loss on the policy, the
entity has no obligation to pay benefits to the employees and the insurer
has sole responsibility for paying the benefits. The payment of fixed
premiums under such contracts is, in substance, the settlement of the
employee benefit obligation, rather than an investment to meet the
obligation. Consequently, the entity no longer has an asset or a liability.
Therefore, an entity treats such payments as contributions to a defined
contribution plan.

Post-employment benefits: defined contribution

plans
43 Accounting for defined contribution plans is straightforward
because the reporting entity’s obligation for each period is determined
22
 Employee Benefits

by the amounts to be contributed for that period. Consequently, no

actuarial assumptions are required to measure the obligation or the
expense and there is no possibility of any actuarial gain or loss.
Moreover, the obligations are measured on an undiscounted basis,
except where they do not fall due wholly within twelve months after the
end of the period in which the employees render the related service.

Recognition and measurement

44 When an employee has rendered service to an entity during a

period, the entity shall recognise the contribution payable to a
defined contribution plan in exchange for that service:

(a) as a liability (accrued expense), after deducting any

contribution already paid. If the contribution already paid
exceeds the contribution due for service before the end
of the reporting period, 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; and
(b) as an expense, unless another Standard requires or
permits the inclusion of the contribution in the cost of
an asset (see, for example, Ind AS 2 and Ind AS 16).

45 Where contributions to a defined contribution plan do not fall

due wholly within twelve months after the end of the period in
which the employees render the related service, they shall be
discounted using the discount rate specified in paragraph 78.

Disclosure

46 An entity shall disclose the amount recognised as an expense

for defined contribution plans.

47 Where required by Ind AS 24 an entity discloses information about

contributions to defined contribution plans for key management
personnel.

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Indian Accounting Standards

Post-employment benefits: defined benefit plans

48 Accounting for defined benefit plans is complex because actuarial
assumptions are required to measure the obligation and the expense
and there is a possibility of actuarial gains and losses. Moreover, the
obligations are measured on a discounted basis because they may be
settled many years after the employees render the related service.

Recognition and measurement

49 Defined benefit plans may be unfunded, or they may be wholly or

partly funded by contributions by an entity, and sometimes its employees,
into an entity, or fund, that is legally separate from the reporting entity
and from which the employee benefits are paid. The payment of funded
benefits when they fall due depends not only on the financial position
and the investment performance of the fund but also on an entity’s
ability (and willingness) to make good any shortfall in the fund’s assets.
Therefore, the entity is, in substance, underwriting the actuarial and
investment risks associated with the plan. Consequently, the expense
recognised for a defined benefit plan is not necessarily the amount of
the contribution due for the period.

50 Accounting by an entity for defined benefit plans involves the

following steps:

(a) using actuarial techniques to make a reliable estimate of

the amount of benefit that employees have earned in return
for their service in the current and prior periods. This
requires an entity to determine how much benefit is
attributable to the current and prior periods (see paragraphs
67–71) and to make estimates (actuarial assumptions) about
demographic variables (such as employee turnover and
mortality) and financial variables (such as future increases
in salaries and medical costs) that will influence the cost of
the benefit (see paragraphs 72–91);
(b) discounting that benefit using the Projected Unit Credit
Method in order to determine the present value of the

24
 Employee Benefits

defined benefit obligation and the current service cost (see

paragraphs 64–66);
(c) determining the fair value of any plan assets (see paragraphs
102–104);
(d) determining the total amount of actuarial gains and losses,
which shall all be recognised in other comprehensive income
(see paragraphs 92–95);
(e) where a plan has been introduced or changed, determining
the resulting past service cost (see paragraphs 96–101);
and
(f) where a plan has been curtailed or settled, determining the
resulting gain or loss (see paragraphs 109–115).

Where an entity has more than one defined benefit plan, the entity
applies these procedures for each material plan separately.

51 In some cases, estimates, averages and computational short cuts

may provide a reliable approximation of the detailed computations
illustrated in this Standard.

Accounting for the constructive obligation

52 An entity shall account not only for its legal obligation under
the formal terms of a defined benefit plan, but also for any
constructive obligation that arises from the entity’s informal
practices. Informal practices give rise to a constructive obligation
where the entity has no realistic alternative but to pay employee
benefits. An example of a constructive obligation is where a change
in the entity’s informal practices would cause unacceptable damage
to its relationship with employees.

53 The formal terms of a defined benefit plan may permit an entity

to terminate its obligation under the plan. Nevertheless, it is usually
difficult for an entity to cancel a plan if employees are to be retained.
Therefore, in the absence of evidence to the contrary, accounting for
post-employment benefits assumes that an entity which is currently

25
Indian Accounting Standards

promising such benefits will continue to do so over the remaining working

lives of employees.

Balance sheet

54 The amount recognised as a defined benefit liability shall be

the net total of the following amounts:

(a) the present value of the defined benefit obligation at

the end of the reporting period (see paragraph 64);
(b) [Refer to Appendix 1 ]
(c) minus any past service cost not yet recognised (see
paragraph 96);
(d) minus the fair value at the end of the reporting period
of plan assets (if any) out of which the obligations are
to be settled directly (see paragraphs 102–104).

55 The present value of the defined benefit obligation is the gross

obligation, before deducting the fair value of any plan assets.

56 An entity shall determine the present value of defined benefit

obligations and the fair value of any plan assets with sufficient
regularity that the amounts recognised in the financial statements
do not differ materially from the amounts that would be determined
at the end of the reporting period.

57 This Standard encourages, but does not require, an entity to

involve a qualified actuary in the measurement of all material post-
employment benefit obligations. For practical reasons, an entity may
request a qualified actuary to carry out a detailed valuation of the
obligation before the end of the reporting period. Nevertheless, the
results of that valuation are updated for any material transactions and
other material changes in circumstances (including changes in market
prices and interest rates) up to the end of the reporting period.

58 The amount determined under paragraph 54 may be negative

(an asset). An entity shall measure the resulting asset at the lower
of:
26
 Employee Benefits

(a) the amount determined under paragraph 54; and

(b) the total of:
(i) any cumulative unrecognised past service cost (see
paragraph 96); and
(ii) the present value of any economic benefits
available in the form of refunds from the plan or
reductions in future contributions to the plan. The
present value of these economic benefits shall be
determined using the discount rate specified in
paragraph 78.

58A The application of paragraph 58 shall not result in a gain

being recognised solely as a result of a past service cost in the
current period. The entity shall therefore recognise immediately
under paragraph 54 the following, to the extent that it arises while
the defined benefit asset is determined in accordance with
paragraph 58(b):

(a) past service cost of the current period to the extent that
it exceeds any reduction in the present value of the
economic benefits specified in paragraph 58(b)(ii). If
there is no change or an increase in the present value
of the economic benefits, the entire past service cost of
the current period shall be recognised immediately under
paragraph 54.
(b) [Refer to Appendix 1]

58B Paragraph 58A applies to an entity only if it has, at the beginning

or end of the accounting period, a surplus* in a defined benefit plan
and cannot, based on the current terms of the plan, recover that surplus
fully through refunds or reductions in future contributions. In such cases,
past service cost that arises in the period, the recognition of which is
deferred under paragraph 54, will increase the amount specified in
paragraph 58(b)(i). If that increase is not offset by an equal decrease in
the present value of economic benefits that qualify for recognition under

* A surplus is an excess of the fair value of the plan assets over the present
value of the defined benefit obligation

27
Indian Accounting Standards

paragraph 58(b)(ii), there will be an increase in the net total specified

by paragraph 58(b) and, hence, a recognised gain. Paragraph 58A
prohibits the recognition of a gain in these circumstances. For examples
of the application of this paragraph, see Appendix D.

59 An asset may arise where a defined benefit plan has been

overfunded or in certain cases where actuarial gains are recognised.
An entity recognises an asset in such cases because:

(a) the entity controls a resource, which is the ability to use the
surplus to generate future benefits;
(b) that control is a result of past events (contributions paid by
the entity and service rendered by the employee); and
(c) future economic benefits are available to the entity in the
form of a reduction in future contributions or a cash refund,
either directly to the entity or indirectly to another plan in
deficit.

60 The limit in paragraph 58(b) does not override the delayed

recognition of certain past service cost (see paragraph 96), other than
as specified in paragraph 58A. Paragraph 120A(f)(iii) requires an entity
to disclose any amount not recognised as an asset because of the limit
in paragraph 58(b).

Profit or loss

61 An entity shall recognise the net total of the following

amounts in profit or loss, except to the extent that another Standard
requires or permits their inclusion in the cost of an asset:

(a) current service cost (see paragraphs 63–91);

(b) interest cost (see paragraph 82);
(c) the expected return on any plan assets (see paragraphs
105–107) and on any reimbursement rights (see
paragraph 104A);
(d) [Refer to Appendix 1]

28
 Employee Benefits

(e) past service cost (see paragraph 96);

(f) the effect of any curtailments or settlements (see
paragraphs 109 and 110); and
(g) [Refer to Appendix 1]

62 Other Standards require the inclusion of certain employee benefit

costs within the cost of assets such as inventories or property, plant
and equipment (see Ind AS 2 and Ind AS 16). Any post-employment
benefit costs included in the cost of such assets include the appropriate
proportion of the components listed in paragraph 61.

Recognition and measurement: present value of

defined benefit obligations and current service cost

63 The ultimate cost of a defined benefit plan may be influenced by

many variables, such as final salaries, employee turnover and mortality,
medical cost trends and, for a funded plan, the investment earnings on
the plan assets. The ultimate cost of the plan is uncertain and this
uncertainty is likely to persist over a long period of time. In order to
measure the present value of the post-employment benefit obligations
and the related current service cost, it is necessary to:

(a) apply an actuarial valuation method (see paragraphs 64–

66);
(b) attribute benefit to periods of service (see paragraphs 67–
71); and
(c) make actuarial assumptions (see paragraphs 72–91).

Actuarial valuation method

64 An entity shall use the Projected Unit Credit Method to

determine the present value of its defined benefit obligations and
the related current service cost and, where applicable, past service
cost.

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Indian Accounting Standards

65 The Projected Unit Credit Method (sometimes known as the

accrued benefit method pro-rated on service or as the benefit/years of
service method) sees each period of service as giving rise to an
additional unit of benefit entitlement (see paragraphs 67–71) and
measures each unit separately to build up the final obligation (see
paragraphs 72–91).

Example illustrating paragraph 65

A lump sum benefit is payable on termination of service and equal to

1% of final salary for each year of service. The salary in year 1 is Rs
10,000 and is assumed to increase at 7% (compound) each year. The
discount rate used is 10% per year. The following table shows how
the obligation builds up for an employee who is expected to leave at
the end of year 5, assuming that there are no changes in actuarial
assumptions. For simplicity, this example ignores the additional
adjustment needed to reflect the probability that the employee may
leave the entity at an earlier or later date.
(Amount in Rs.)
Year 1 2 3 4 5
Benefit attributed to:
– prior years 0 131 262 393 524
– current year
(1% of final salary) 131
____ 131
____ 131
____ 131
____ 131
____
– current and prior years 131
____ 262
____ 393
____ 524
____ 655
____
Opening obligation – 89 196 324 476
Interest at 10% – 9 20 33 48
Current service cost 89
____ 98
____ 108
____ 119
____ 131
____
Closing obligation 89
____ 196
____ 324
____ 476
____ 655
____
Note:
1. The opening obligation is the present value of benefit
attributed to prior years.
2. The current service cost is the present value of benefit
attributed to the current year.
3. The closing obligation is the present value of benefit
attributed to current and prior years.

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 Employee Benefits

66 An entity discounts the whole of a post-employment benefit

obligation, even if part of the obligation falls due within twelve months
after the reporting period.

Attributing benefit to periods of service

67 In determining the present value of its defined benefit

obligations and the related current service cost and, where
applicable, past service cost, an entity shall attribute benefit to
periods of service under the plan’s benefit formula. However, if an
employee’s service in later years will lead to a materially higher
level of benefit than in earlier years, an entity shall attribute benefit
on a straight-line basis from:

(a) the date when service by the employee first leads to

benefits under the plan (whether or not the benefits are
conditional on further service); until
(b) the date when further service by the employee will lead
to no material amount of further benefits under the plan,
other than from further salary increases.

68 The Projected Unit Credit Method requires an entity to attribute

benefit to the current period (in order to determine current service cost)
and the current and prior periods (in order to determine the present
value of defined benefit obligations). An entity attributes benefit to
periods in which the obligation to provide post-employment benefits
arises. That obligation arises as employees render services in return
for post-employment benefits which an entity expects to pay in future
reporting periods. Actuarial techniques allow an entity to measure that
obligation with sufficient reliability to justify recognition of a liability.

Examples illustrating paragraph 68

1 A defined benefit plan provides a lump-sum benefit of Rs 100

payable on retirement for each year of service.
A benefit of Rs 100 is attributed to each year. The current service
cost is the present value of Rs 100. The present value of the

31
Indian Accounting Standards

defined benefit obligation is the present value of Rs100, multiplied

by the number of years of service up to the end of the reporting
period.
If the benefit is payable immediately when the employee leaves
the entity, the current service cost and the present value of the
defined benefit obligation reflect the date at which the employee
is expected to leave. Thus, because of the effect of discounting,
they are less than the amounts that would be determined if the
employee left at the end of the reporting period.
2 A plan provides a monthly pension of 0.2% of final salary for
each year of service. The pension is payable from the age of 65.
Benefit equal to the present value, at the expected retirement
date, of a monthly pension of 0.2% of the estimated final salary
payable from the expected retirement date until the expected
date of death is attributed to each year of service. The current
service cost is the present value of that benefit. The present
value of the defined benefit obligation is the present value of
monthly pension payments of 0.2% of final salary, multiplied by
the number of years of service up to the end of the reporting
period. The current service cost and the present value of the
defined benefit obligation are discounted because pension
payments begin at the age of 65.

69 Employee service gives rise to an obligation under a defined

benefit plan even if the benefits are conditional on future employment
(in other words they are not vested). Employee service before the vesting
date gives rise to a constructive obligation because, at the end of each
successive reporting period, the amount of future service that an
employee will have to render before becoming entitled to the benefit is
reduced. In measuring its defined benefit obligation, an entity considers
the probability that some employees may not satisfy any vesting
requirements. Similarly, although certain post-employment benefits, for
example, post-employment medical benefits, become payable only if a
specified event occurs when an employee is no longer employed, an
obligation is created when the employee renders service that will provide
entitlement to the benefit if the specified event occurs. The probability
that the specified event will occur affects the measurement of the
obligation, but does not determine whether the obligation exists.
32
 Employee Benefits

Examples illustrating paragraph 69

1 A plan pays a benefit of Rs 100 for each year of service. The

benefits vest after ten years of service.
A benefit of Rs 100 is attributed to each year. In each of the first
ten years, the current service cost and the present value of the
obligation reflect the probability that the employee may not
complete ten years of service.
2 A plan pays a benefit of Rs 100 for each year of service, excluding
service before the age of 25. The benefits vest immediately.
No benefit is attributed to service before the age of 25 because
service before that date does not lead to benefits (conditional or
unconditional). A benefit of Rs 100 is attributed to each
subsequent year.

70 The obligation increases until the date when further service by

the employee will lead to no material amount of further benefits.
Therefore, all benefit is attributed to periods ending on or before that
date. Benefit is attributed to individual accounting periods under the
plan’s benefit formula. However, if an employee’s service in later years
will lead to a materially higher level of benefit than in earlier years, an
entity attributes benefit on a straight-line basis until the date when
further service by the employee will lead to no material amount of further
benefits. That is because the employee’s service throughout the entire
period will ultimately lead to benefit at that higher level.

Examples illustrating paragraph 70

1 A plan pays a lump-sum benefit of Rs 1,000 that vests after ten

years of service. The plan provides no further benefit for
subsequent service.

A benefit of Rs 100 (Rs 1,000 divided by ten) is attributed to each of

the first ten years. The current service cost in each of the first ten
years reflects the probability that the employee may not complete
ten years of service. No benefit is attributed to subsequent years.

33
Indian Accounting Standards

2 A plan pays a lump-sum retirement benefit of Rs 2,000 to all

employees who are still employed at the age of 55 after twenty
years of service, or who are still employed at the age of 65,
regardless of their length of service.

For employees who join before the age of 35, service first leads
to benefits under the plan at the age of 35 (an employee could
leave at the age of 30 and return at the age of 33, with no effect
on the amount or timing of benefits). Those benefits are conditional
on further service. Also, service beyond the age of 55 will lead to
no material amount of further benefits. For these employees, the
entity attributes benefit of Rs 100 (Rs 2,000 divided by 20) to
each year from the age of 35 to the age of 55.

For employees who join between the ages of 35 and 45, service
beyond twenty years will lead to no material amount of further
benefits. For these employees, the entity attributes benefit of
Rs 100 (Rs 2,000 divided by 20) to each of the first twenty
years.

For an employee who joins at the age of 55, service beyond ten
years will lead to no material amount of further benefits. For this
employee, the entity attributes benefit of Rs 200 (Rs 2,000 divided
by 10) to each of the first ten years.

For all employees, the current service cost and the present value
of the obligation reflect the probability that the employee may not
complete the necessary period of service.

3 A post-employment medical plan reimburses 40% of an employee’s

post-employment medical costs if the employee leaves after more
than ten and less than twenty years of service and 50% of those
costs if the employee leaves after twenty or more years of
service.

Under the plan’s benefit formula, the entity attributes 4% of the

present value of the expected medical costs (40% divided by ten)
to each of the first ten years and 1% (10% divided by ten) to each

34
 Employee Benefits

of the second ten years. The current service cost in each year
reflects the probability that the employee may not complete the
necessary period of service to earn part or all of the benefits. For
employees expected to leave within ten years, no benefit is
attributed.

4 A post-employment medical plan reimburses 10% of an employee’s

post-employment medical costs if the employee leaves after more
than ten and less than twenty years of service and 50% of those
costs if the employee leaves after twenty or more years of service.

Service in later years will lead to a materially higher level of

benefit than in earlier years. Therefore, for employees expected
to leave after twenty or more years, the entity attributes benefit
on a straight-line basis under paragraph 68. Service beyond twenty
years will lead to no material amount of further benefits. Therefore,
the benefit attributed to each of the first twenty years is 2.5% of
the present value of the expected medical costs (50% divided by
twenty).

For employees expected to leave between ten and twenty years,

the benefit attributed to each of the first ten years is 1% of the
present value of the expected medical costs. For these employees,
no benefit is attributed to service between the end of the tenth
year and the estimated date of leaving.

For employees expected to leave within ten years, no benefit is

attributed.

5 An entity has 1,000 employees. As per the statutory requirements,

gratuity shall be payable to an employee on the termination of his
employment after he has rendered continuous service for not less
than five years (a) on his superannuation, or (b) on his retirement
or resignation, or (c) on his death or disablement due to accident
or disease. The completion of continuous service of five years
shall not be necessary where the termination of the employment
of any employee is due to death or disablement. The amount
payable is determined by a formula linked to number of years of

35
Indian Accounting Standards

service and last drawn salary. As per the law, the amount payable
shall not exceed Rs.1,000,000.

The amount of gratuity attributed to each year of service will be

calculated as follows:

Number of employees not likely to fulfil the eligibility criteria will

be ignored.

Other employees will be grouped according to period of service

they are expected to render taking into account mortality rate,
disablement and resignation after 5 years. Gratuity payable will
be calculated in accordance with the formula prescribed in the
governing statute based on the period of service and the salary
at the time of termination of employment, assuming promotion,
salary increases etc.

For those employees for whom the amount payable as per the
formula does not exceed Rs.1,000,000, over the expected period
of service, the amount payable will be divided by the expected
period of service and the resulting amount will be attributed to
each year of the expected period of service, including the period
before the stipulated period of 5 years.

In case of the remaining employees, the amount as per the formula

exceeds Rs. 1,000,000 over the expected period of service of 10
years, and the amount of the statutory threshold of Rs. 1,000,000
is reached at the end of 8 years. Rs. 1,25,000 (Rs. 1,000,000
divided by 8) is attributed to each of the first 8 years. In this
case, no benefit is attributed to subsequent two years. This is
because service beyond 8 years will lead to no material amount
of further benefits.

71 Where the amount of a benefit is a constant proportion of final

salary for each year of service, future salary increases will affect the
amount required to settle the obligation that exists for service before
the end of the reporting period, but do not create an additional obligation.
Therefore:

36
 Employee Benefits

(a) for the purpose of paragraph 67(b), salary increases do not

lead to further benefits, even though the amount of the
benefits is dependent on final salary; and
(b) the amount of benefit attributed to each period is a constant
proportion of the salary to which the benefit is linked.

Example illustrating paragraph 71

Employees are entitled to a benefit of 3% of final salary for each year

of service before the age of 55.

Benefit of 3% of estimated final salary is attributed to each year up to

the age of 55. This is the date when further service by the employee
will lead to no material amount of further benefits under the plan. No
benefit is attributed to service after that age.

Actuarial assumptions

72 Actuarial assumptions shall be unbiased and mutually

compatible.

73 Actuarial assumptions are an entity’s best estimates of the

variables that will determine the ultimate cost of providing post-
employment benefits. Actuarial assumptions comprise:

(a) demographic assumptions about the future characteristics

of current and former employees (and their dependants)
who are eligible for benefits. Demographic assumptions deal
with matters such as:
(i) mortality, both during and after employment;
(ii) rates of employee turnover, disability and early
retirement;
(iii) the proportion of plan members with dependants who
will be eligible for benefits; and
(iv) claim rates under medical plans; and

37
Indian Accounting Standards

(b) financial assumptions, dealing with items such as:

(i) the discount rate (see paragraphs 78–82);
(ii) future salary and benefit levels (see paragraphs 83–
87);
(iii) in the case of medical benefits, future medical costs,
including, where material, the cost of administering
claims and benefit payments (see paragraphs 88–91);
and
(iv) the expected rate of return on plan assets (see
paragraphs 105–107).

74 Actuarial assumptions are unbiased if they are neither imprudent

nor excessively conservative.

75 Actuarial assumptions are mutually compatible if they reflect the

economic relationships between factors such as inflation, rates of salary
increase, the return on plan assets and discount rates. For example, all
assumptions which depend on a particular inflation level (such as
assumptions about interest rates and salary and benefit increases) in
any given future period assume the same inflation level in that period.

76 An entity determines the discount rate and other financial

assumptions in nominal (stated) terms, unless estimates in real (inflation-
adjusted) terms are more reliable, for example, in a hyperinflationary
economy (see Ind AS 29 Financial Reporting in Hyperinflationary
Economies ), or where the benefit is index-linked and there is a deep
market in index-linked bonds of the same currency and term.

77 Financial assumptions shall be based on market expectations,

at the end of the reporting period, for the period over which the
obligations are to be settled.

Actuarial assumptions: discount rate

78 The rate used to discount post-employment benefit obligations

(both funded and unfunded) shall be determined by reference to
market yields at the end of the reporting period on government

38
 Employee Benefits

bonds. The currency and term of the government bonds shall be

consistent with the currency and estimated term of the post-
employment benefit obligations.

79 One actuarial assumption which has a material effect is the

discount rate. The discount rate reflects the time value of money but
not the actuarial or investment risk. Furthermore, the discount rate does
not reflect the entity-specific credit risk borne by the entity’s creditors,
nor does it reflect the risk that future experience may differ from actuarial
assumptions.

80 The discount rate reflects the estimated timing of benefit

payments. In practice, an entity often achieves this by applying a single
weighted average discount rate that reflects the estimated timing and
amount of benefit payments and the currency in which the benefits are
to be paid.

81 In some cases, there may be no government bonds with a

sufficiently long maturity to match the estimated maturity of all the benefit
payments. In such cases, an entity uses current market rates of the
appropriate term to discount shorter term payments, and estimates the
discount rate for longer maturities by extrapolating current market rates
along the yield curve. The total present value of a defined benefit
obligation is unlikely to be particularly sensitive to the discount rate
applied to the portion of benefits that is payable beyond the final maturity
of the government bonds.

82 Interest cost is computed by multiplying the discount rate as

determined at the start of the period by the present value of the defined
benefit obligation throughout that period, taking account of any material
changes in the obligation. The present value of the obligation will differ
from the liability recognised in the balance sheet because the liability is
recognised after deducting the fair value of any plan assets and because
some past service cost is not recognised immediately. [Appendix B
illustrates the computation of interest cost, among other things.]

39
Indian Accounting Standards

Actuarial assumptions: salaries, benefits and medical costs

83 Post-employment benefit obligations shall be measured on a

basis that reflects:

(a) estimated future salary increases;

(b) the benefits set out in the terms of the plan (or resulting
from any constructive obligation that goes beyond those
terms) at the end of the reporting period; and
(c) estimated future changes in the level of any state
benefits that affect the benefits payable under a defined
benefit plan, if, and only if, either:
(i) those changes were enacted before the end of the
reporting period; or
(ii) past history, or other reliable evidence, indicates
that those state benefits will change in some
predictable manner, for example, in line with future
changes in general price levels or general salary
levels.

84 Estimates of future salary increases take account of inflation,

seniority, promotion and other relevant factors, such as supply and
demand in the employment market.

85 If the formal terms of a plan (or a constructive obligation that

goes beyond those terms) require an entity to change benefits in future
periods, the measurement of the obligation reflects those changes. This
is the case when, for example:

(a) the entity has a past history of increasing benefits, for

example, to mitigate the effects of inflation, and there is no
indication that this practice will change in the future; or
(b) actuarial gains have already been recognised in the financial
statements and the entity is obliged, by either the formal
terms of a plan (or a constructive obligation that goes beyond
those terms) or legislation, to use any surplus in the plan
for the benefit of plan participants (see paragraph 98(c) ).

40
 Employee Benefits

86 Actuarial assumptions do not reflect future benefit changes that are not
set out in the formal terms of the plan (or a constructive obligation) at the end of
the reporting period. Such changes will result in:

(a) past service cost, to the extent that they change benefits
for service before the change; and
(b) current service cost for periods after the change, to the
extent that they change benefits for service after the change.

87 Some post-employment benefits are linked to variables such as

the level of state retirement benefits or state medical care. The
measurement of such benefits reflects expected changes in such
variables, based on past history and other reliable evidence.

88 Assumptions about medical costs shall take account of

estimated future changes in the cost of medical services, resulting
from both inflation and specific changes in medical costs.

89 Measurement of post-employment medical benefits requires

assumptions about the level and frequency of future claims and the
cost of meeting those claims. An entity estimates future medical costs
on the basis of historical data about the entity’s own experience,
supplemented where necessary by historical data from other entities,
insurance companies, medical providers or other sources. Estimates of
future medical costs consider the effect of technological advances,
changes in health care utilisation or delivery patterns and changes in
the health status of plan participants.

90 The level and frequency of claims is particularly sensitive to the

age, health status and sex of employees (and their dependants) and
may be sensitive to other factors such as geographical location.
Therefore, historical data is adjusted to the extent that the demographic
mix of the population differs from that of the population used as a basis
for the historical data. It is also adjusted where there is reliable evidence
that historical trends will not continue.

91 Some post-employment health care plans require employees to

contribute to the medical costs covered by the plan. Estimates of future
medical costs take account of any such contributions, based on the
41
Indian Accounting Standards

terms of the plan at the end of the reporting period (or based on any
constructive obligation that goes beyond those terms). Changes in those
employee contributions result in past service cost or, where applicable,
curtailments. The cost of meeting claims may be reduced by benefits
from state or other medical providers (see paragraphs 83(c) and 87).

Actuarial gains and losses

92 In measuring its defined benefit liability in accordance with

paragraph 54, an entity shall recognise immediately in other
comprehensive income all of its actuarial gains and losses.

93 [Refer to Appendix 1]

93A [Refer to Appendix 1]

93B Actuarial gains and losses recognised in other comprehensive

income shall be presented in the statement of profit and loss.

93C An entity shall also recognise any adjustments arising from the
limit in paragraph 58(b) in other comprehensive income.

93D Actuarial gains and losses and adjustments arising from the limit
in paragraph 58(b) that have been recognised in other comprehensive
income shall be recognised immediately in retained earnings. They shall
not be reclassified to profit or loss in a subsequent period.

94 Actuarial gains and losses may result from increases or decreases

in either the present value of a defined benefit obligation or the fair
value of any related plan assets. Causes of actuarial gains and losses
include, for example:

(a) unexpectedly high or low rates of employee turnover, early

retirement or mortality or of increases in salaries, benefits
(if the formal or constructive terms of a plan provide for
inflationary benefit increases) or medical costs;

42
 Employee Benefits

(b) the effect of changes in estimates of future employee

turnover, early retirement or mortality or of increases in
salaries, benefits (if the formal or constructive terms of a
plan provide for inflationary benefit increases) or medical
costs;
(c) the effect of changes in the discount rate; and
(d) differences between the actual return on plan assets and
the expected return on plan assets (see paragraphs 105–
107).
95 [Refer to Appendix 1]

Past service cost

96 In measuring its defined benefit liability under paragraph 54,

an entity shall, subject to paragraph 58A, recognise past service
cost as an expense on a straight-line basis over the average period
until the benefits become vested. To the extent that the benefits
are already vested immediately following the introduction of, or
changes to, a defined benefit plan, an entity shall recognise past
service cost immediately.

97 Past service cost arises when an entity introduces a defined

benefit plan that attributes benefits to past service or changes the
benefits payable for past service under an existing defined benefit plan.
Such changes are in return for employee service over the period until
the benefits concerned are vested. Therefore, the entity recognises
past service cost over that period, regardless of the fact that the cost
refers to employee service in previous periods. The entity measures
past service cost as the change in the liability resulting from the
amendment (see paragraph 64). Negative past service cost arises when
an entity changes the benefits attributable to past service so that the
present value of the defined benefit obligation decreases.

Example illustrating paragraph 97

An entity operates a pension plan that provides a pension of 2% of
final salary for each year of service. The benefits become vested after
five years of service. On 1 January 20X5 the entity improves the

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Indian Accounting Standards

pension to 2.5% of final salary for each year of service starting from
1 January 20X1. At the date of the improvement, the present value of
the additional benefits for service from 1 January 20X1 to 1 January
20X5 is as follows:

(Amount in Rs.)
Employees with more than five years’ service at 1/1/X5 150
Employees with less than five years’ service at 1/1/X5
(average period until vesting: three years) 120
_____
270
_____
The entity recognises Rs 150 immediately because those
benefits are already vested. The entity recognises Rs 120
on a straight-line basis over three years from 1 January 20X5.

98 Past service cost excludes:

(a) the effect of differences between actual and previously

assumed salary increases on the obligation to pay benefits
for service in prior years (there is no past service cost
because actuarial assumptions allow for projected salaries);
(b) underestimates and overestimates of discretionary pension
increases when an entity has a constructive obligation to
grant such increases (there is no past service cost because
actuarial assumptions allow for such increases);
(c) estimates of benefit improvements that result from actuarial
gains that have been recognised in the financial statements
if the entity is obliged, by either the formal terms of a plan
(or a constructive obligation that goes beyond those terms)
or legislation, to use any surplus in the plan for the benefit
of plan participants, even if the benefit increase has not yet
been formally awarded (the resulting increase in the
obligation is an actuarial loss and not past service cost,
see paragraph 85(b));
(d) the increase in vested benefits when, in the absence of
new or improved benefits, employees complete vesting
requirements (there is no past service cost because the
entity recognised the estimated cost of benefits as current
service cost as the service was rendered); and

44
 Employee Benefits

(e) the effect of plan amendments that reduce benefits for future
service (a curtailment).
99 An entity establishes the amortisation schedule for past service
cost when the benefits are introduced or changed. It would be
impracticable to maintain the detailed records needed to identify and
implement subsequent changes in that amortisation schedule. Moreover,
the effect is likely to be material only where there is a curtailment or
settlement. Therefore, an entity amends the amortisation schedule for
past service cost only if there is a curtailment or settlement.

100 Where an entity reduces benefits payable under an existing

defined benefit plan, the resulting reduction in the defined benefit liability
is recognised as (negative) past service cost over the average period
until the reduced portion of the benefits becomes vested.

101 Where an entity reduces certain benefits payable under an existing

defined benefit plan and, at the same time, increases other benefits
payable under the plan for the same employees, the entity treats the
change as a single net change.

Recognition and measurement: plan assets

Fair value of plan assets

102 The fair value of any plan assets is deducted in determining the
amount recognised in the balance sheet under paragraph 54. When no
market price is available, the fair value of plan assets is estimated; for
example, by discounting expected future cash flows using a discount
rate that reflects both the risk associated with the plan assets and the
maturity or expected disposal date of those assets (or, if they have no
maturity, the expected period until the settlement of the related
obligation).

103 Plan assets exclude unpaid contributions due from the reporting
entity to the fund, as well as any non-transferable financial instruments
issued by the entity and held by the fund. Plan assets are reduced by
any liabilities of the fund that do not relate to employee benefits, for

45
Indian Accounting Standards

example, trade and other payables and liabilities resulting from derivative
financial instruments.

104 Where plan assets include qualifying insurance policies that

exactly match the amount and timing of some or all of the benefits
payable under the plan, the fair value of those insurance policies is
deemed to be the present value of the related obligations, as described
in paragraph 54 (subject to any reduction required if the amounts
receivable under the insurance policies are not recoverable in full).

Reimbursements

104A When, and only when, it is virtually certain that another party
will reimburse some or all of the expenditure required to settle a
defined benefit obligation, an entity shall recognise its right to
reimbursement as a separate asset. The entity shall measure the
asset at fair value. In all other respects, an entity shall treat that
asset in the same way as plan assets. In the statement of profit
and loss, the expense relating to a defined benefit plan may be
presented net of the amount recognised for a reimbursement.

104B Sometimes, an entity is able to look to another party, such as an

insurer, to pay part or all of the expenditure required to settle a defined
benefit obligation. Qualifying insurance policies, as defined in paragraph
7, are plan assets. An entity accounts for qualifying insurance policies
in the same way as for all other plan assets and paragraph 104A does
not apply (see paragraphs 39–42 and 104).

104C When an insurance policy is not a qualifying insurance policy,

that insurance policy is not a plan asset. Paragraph 104A deals with
such cases: the entity recognises its right to reimbursement under the
insurance policy as a separate asset, rather than as a deduction in
determining the defined benefit liability recognised under paragraph 54;
in all other respects, the entity treats that asset in the same way as
plan assets. Paragraph 120A(f)(iv) requires the entity to disclose a brief
description of the link between the reimbursement right and the related
obligation.

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 Employee Benefits

Example illustrating paragraphs 104A–104C

(Amount in Rs.)
Present value of obligation 1,258
______
Liability recognised in balance sheet 1,258
______
______
Rights under insurance policies that exactly match the
amount and timing of some of the benefits payable under
the plan. Those benefits have a present value of Rs 1,092. 1,092
______
______

104D If the right to reimbursement arises under an insurance policy

that exactly matches the amount and timing of some or all of the benefits
payable under a defined benefit plan, the fair value of the reimbursement
right is deemed to be the present value of the related obligation, as
described in paragraph 54 (subject to any reduction required if the
reimbursement is not recoverable in full).

Return on plan assets

105 The expected return on plan assets is one component of the

expense recognised in profit or loss. The difference between the
expected return on plan assets and the actual return on plan assets is
an actuarial gain or loss.

106 The expected return on plan assets is based on market

expectations, at the beginning of the period, for returns over the entire
life of the related obligation. The expected return on plan assets reflects
changes in the fair value of plan assets held during the period as a
result of actual contributions paid into the fund and actual benefits paid
out of the fund.

47
Indian Accounting Standards

Example illustrating paragraph 106

At 1 January 20X1, the fair value of plan assets was Rs 10,000. On 30

June 20X1, the plan paid benefits of Rs 1,900 and received contributions
of Rs 4,900. At 31 December 20X1, the fair value of plan assets was
Rs 15,000 and the present value of the defined benefit obligation was
Rs 14,792. Actuarial losses on the obligation for 20X1 were Rs 60.

At 1 January 20X1, the reporting entity made the following estimates,

based on market prices at that date:
%
Interest and dividend income, after tax payable by the fund 9.25
Realised and unrealised gains on plan assets (after tax) 2.00
Administration costs (1.00)
______
Expected rate of return 10.25
______
______
For 20X1, the expected and actual return on plan assets areas follows:
(Amount in Rs.)
Return on Rs 10,000 held for 12 months at 10.25% 1,025
Return on Rs 3,000 held for six months at 5%
(equivalent to 10.25% annually, compounded every six months) 150
______
Expected return on plan assets for 20X1 1,175
______
______
Fair value of plan assets at 31 December 20X1 15,000
Less fair value of plan assets at 1 January 20X1 (10,000)
Less contributions received (4,900)
Add benefits paid 1,900
______
Actual return on plan assets 2,000
______
______
The difference between the expected return on plan assets (Rs 1,175)
and the actual return on plan assets (Rs 2,000) is an actuarial gain of
Rs 825. Therefore, the net actuarial gains of Rs 765 (825-60 (actuarial
loss on the obligation)) would be recognised in other comprehensive
income.

The expected return on plan assets for 20X2 will be based on market
expectations at 1/1/X2 for returns over the entire life of the
obligation.
48
 Employee Benefits

107 In determining the expected and actual return on plan assets, an

entity deducts expected administration costs, other than those included
in the actuarial assumptions used to measure the obligation.

Business combinations

108 In a business combination, an entity recognises assets and

liabilities arising from post-employment benefits at the present value of
the obligation less the fair value of any plan assets (see Ind AS 103)
Business Combinations ). The present value of the obligation includes
all of the following, even if the acquiree had not yet recognised them at
the acquisition date:

(a) actuarial gains and losses that arose before the acquisition
date;
(b) past service cost that arose from benefit changes, or the
introduction of a plan, before the acquisition date; and
(c) [Refer to Appendix 1]

Curtailments and settlements

109 An entity shall recognise gains or losses on the curtailment

or settlement of a defined benefit plan when the curtailment or
settlement occurs. The gain or loss on a curtailment or settlement
shall comprise:

(a) any resulting change in the present value of the defined

benefit obligation;
(b) any resulting change in the fair value of the plan assets;
(c) any related past service cost that, under paragraph 96
had not previously been recognised.

110 Before determining the effect of a curtailment or settlement,

an entity shall remeasure the obligation (and the related plan assets,
if any) using current actuarial assumptions (including current market
interest rates and other current market prices).

49
Indian Accounting Standards

111 A curtailment occurs when an entity either:

(a) is demonstrably committed to make a significant reduction

in the number of employees covered by a plan; or
(b) amends the terms of a defined benefit plan so that a
significant element of future service by current employees
will no longer qualify for benefits, or will qualify only for
reduced benefits.

A curtailment may arise from an isolated event, such as the closing of a

plant, discontinuance of an operation or termination or suspension of a
plan, or a reduction in the extent to which future salary increases are
linked to the benefits payable for past service. Curtailments are often
linked with a restructuring. When this is the case, an entity accounts for
a curtailment at the same time as for a related restructuring.

111A When a plan amendment reduces benefits, only the effect of the
reduction for future service is a curtailment. The effect of any reduction
for past service is a negative past service cost.

112 A settlement occurs when an entity enters into a transaction that

eliminates all further legal or constructive obligation for part or all of
the benefits provided under a defined benefit plan, for example, when a
lump-sum cash payment is made to, or on behalf of, plan participants in
exchange for their rights to receive specified post-employment benefits.

113 In some cases, an entity acquires an insurance policy to fund

some or all of the employee benefits relating to employee service in the
current and prior periods. The acquisition of such a policy is not a
settlement if the entity retains a legal or constructive obligation (see
paragraph 39) to pay further amounts if the insurer does not pay the
employee benefits specified in the insurance policy. Paragraphs 104A–
104D deal with the recognition and measurement of reimbursement rights
under insurance policies that are not plan assets.

114 A settlement occurs together with a curtailment if a plan is

terminated such that the obligation is settled and the plan ceases to
exist. However, the termination of a plan is not a curtailment or

50
 Employee Benefits

settlement if the plan is replaced by a new plan that offers benefits that
are, in substance, identical.

115 Where a curtailment relates to only some of the employees

covered by a plan, or where only part of an obligation is settled, the
gain or loss includes a proportionate share of the previously
unrecognised past service cost . The proportionate share is determined
on the basis of the present value of the obligations before and after the
curtailment or settlement, unless another basis is more rational in the
circumstances.

Example illustrating paragraph 115

An entity discontinues an operating segment and employees of the

discontinued segment will earn no further benefits. This is a curtailment
without a settlement. Using current actuarial assumptions (including
current market interest rates and other current market prices)
immediately before the curtailment, the entity has a defined benefit
obligation with a net present value of Rs 1,000, plan assets with a fair
value of Rs 820 and unrecognised past service cost of Rs 50. The
curtailment reduces the net present value of the obligation by Rs 100
to Rs 900.

Of the previously unrecognised past service cost, 10% (100/1,000)

relates to the part of the obligation that was eliminated through the
curtailment. Therefore, the effect of the curtailment is as follows:

(Amount in Rs.)
Before Curtailment After
curtailment gain curtailment
Net present value of 1,000 (100) 900
obligation
Fair value of plan assets (820)
_______ _______– (820)
_______
180 (100) 80
Unrecognised past service cost_______
(50) _______5 (45)
_______
Net liability recognised in
balance sheet 130
_______ (95)
_______ 35
_______
_______ _______ _______

51
Indian Accounting Standards

Presentation

Offset

116 An entity shall offset an asset relating to one plan against a

liability relating to another plan when, and only when, the entity:

(a) has a legally enforceable right to use a surplus in one

plan to settle obligations under the other plan; and
(b) intends either to settle the obligations on a net basis,
or to realise the surplus in one plan and settle its
obligation under the other plan simultaneously.

117 The offsetting criteria are similar to those established for financial
instruments in Ind AS 32 Financial Instruments: Presentation.

Current/non-current distinction

118 Some entities are required to distinguish current assets and

liabilities from non-current assets and liabilities. This Standard does
not specify whether an entity should distinguish current and non-current
portions of assets and liabilities arising from post-employment benefits.

Financial components of post-employment benefit costs

119 This Standard does not specify whether an entity should present
current service cost, interest cost and the expected return on plan assets
as components of a single item of income or expense in the statement
of profit and loss.

Disclosure

120 An entity shall disclose information that enables users of

financial statements to evaluate the nature of its defined benefit
plans and the financial effects of changes in those plans during
the period.

52
 Employee Benefits

120A An entity shall disclose the following information about

defined benefit plans:

(a) the entity’s accounting policy for recognising actuarial

gains and losses.
(b) a general description of the type of plan.
(c) a reconciliation of opening and closing balances of the
present value of the defined benefit obligation showing
separately, if applicable, the effects during the period
attributable to each of the following:
(i) current service cost,
(ii) interest cost,
(iii) contributions by plan participants,
(iv) actuarial gains and losses,
(v) oreign currency exchange rate changes on plans
measured in a currency different from the entity’s
presentation currency,
(vi) benefits paid,
(vii) past service cost,
(viii) business combinations,
(ix) curtailments and
(x) settlements.
(d) an analysis of the defined benefit obligation into
amounts arising from plans that are wholly unfunded
and amounts arising from plans that are wholly or partly
funded.
(e) a reconciliation of the opening and closing balances of
the fair value of plan assets and of the opening and
closing balances of any reimbursement right recognised
as an asset in accordance with paragraph 104A showing
separately, if applicable, the effects during the period
attributable to each of the following:
(i) expected return on plan assets,

53
Indian Accounting Standards

(ii) actuarial gains and losses,

(iii) foreign currency exchange rate changes on plans
measured in a currency different from the entity’s
presentation currency,
(iv) contributions by the employer,
(v) ontributions by plan participants,
(vi) benefits paid,
(vii) business combinations and
(viii) settlements.
(f) a reconciliation of the present value of the defined
benefit obligation in (c) and the fair value of the plan
assets in (e) to the assets and liabilities recognised in
the balance sheet, showing at least:
(i) [Refer to Appendix 1]
(ii) he past service cost not recognised in the balance
sheet (see paragraph 96);
(iii) any amount not recognised as an asset, because
of the limit in paragraph 58(b);
(iv) the fair value at the end of the reporting period of
any reimbursement right recognised as an asset in
accordance with paragraph 104A (with a brief
description of the link between the reimbursement
right and the related obligation); and
(v) the other amounts recognised in the balance sheet.
(g) the total expense recognised in profit or loss for each
of the following, and the line item(s) in which they are
included:
(i) current service cost;
(ii) interest cost;
(iii) expected return on plan assets;
(iv) expected return on any reimbursement right
recognised as an asset in accordance with paragraph
104A;
54
 Employee Benefits

(v) [Refer to Appendix 1]

(vi) past service cost;
(vii) the effect of any curtailment or settlement; and
(viii) [Refer to Appendix 1]
(h) the total amount recognised in other comprehensive
income for each of the following:
(i) actuarial gains and losses; and
(ii) the effect of the limit in paragraph 58(b).
(i) the cumulative amount of actuarial gains and losses
recognised in other comprehensive income.
(j) for each major category of plan assets, which shall
include, but is not limited to, equity instruments, debt
instruments, property, and all other assets, the
percentage or amount that each major category
constitutes of the fair value of the total plan assets.
(k) the amounts included in the fair value of plan assets
for:
(i) each category of the entity’s own financial
instruments; and
(ii) any property occupied by, or other assets used by,
the entity.
(l) a narrative description of the basis used to determine
the overall expected rate of return on assets, including
the effect of the major categories of plan assets.
(m) the actual return on plan assets, as well as the actual
return on any reimbursement right recognised as an
asset in accordance with paragraph 104A.
(n) the principal actuarial assumptions used as at the end
of the reporting period, including, when applicable:
(i) the discount rates;
(ii) the expected rates of return on any plan assets for
the periods presented in the financial statements;

55
Indian Accounting Standards

(iii) the expected rates of return for the periods

presented in the financial statements on any
reimbursement right recognised as an asset in
accordance with paragraph 104A;
(iv) the expected rates of salary increases (and of
changes in an index or other variable specified in
the formal or constructive terms of a plan as the
basis for future benefit increases);
(v) medical cost trend rates; and
(vi) any other material actuarial assumptions used.
An entity shall disclose each actuarial assumption in
absolute terms (for example, as an absolute percentage)
and not just as a margin between different percentages
or other variables.
(o) the effect of an increase of one percentage point and
the effect of a decrease of one percentage point in the
assumed medical cost trend rates on:
(i) the aggregate of the current service cost and
interest cost components of net periodic post-
employment medical costs; and
(ii) the accumulated post-employment benefit
obligation for medical costs.
For the purposes of this disclosure, all other
assumptions shall be held constant. For plans operating
in a high inflation environment, the disclosure shall be
the effect of a percentage increase or decrease in the
assumed medical cost trend rate of a significance similar
to one percentage point in a low inflation environment.
(p) the amounts for the current annual period and previous
four annual periods of:
(i) the present value of the defined benefit obligation,
the fair value of the plan assets and the surplus or
deficit in the plan; and

56
 Employee Benefits

(ii) the experience adjustments arising on:

(a) the plan liabilities expressed either as (1) an
amount or (2) a percentage of the plan
liabilities at the end of the reporting period
and
(a) the plan assets expressed either as (1) an
amount or (2) a percentage of the plan assets
at the end of the reporting period.
(q) the employer’s best estimate, as soon as it can
reasonably be determined, of contributions expected to
be paid to the plan during the annual period beginning
after the reporting period.

121 Paragraph 120A(b) requires a general description of the type of

plan. Such a description distinguishes, for example, flat salary pension
plans from final salary pension plans and from post-employment medical
plans. The description of the plan shall include informal practices that
give rise to constructive obligations included in the measurement of the
defined benefit obligation in accordance with paragraph 52. Further
detail is not required.

122 When an entity has more than one defined benefit plan,
disclosures may be made in total, separately for each plan, or in such
groupings as are considered to be the most useful. It may be useful to
distinguish groupings by criteria such as the following:

(a) the geographical location of the plans, for example, by

distinguishing domestic plans from foreign plans; or
(b) whether plans are subject to materially different risks, for
example, by distinguishing flat salary pension plans from
final salary pension plans and from post-employment medical
plans.

When an entity provides disclosures in total for a grouping of plans,

such disclosures are provided in the form of weighted averages or of
relatively narrow ranges.

57
Indian Accounting Standards

123 Paragraph 30 requires additional disclosures about multi-employer

defined benefit plans that are treated as if they were defined contribution
plans.

124 Where required by Ind AS 24 an entity discloses information about:

(a) related party transactions with post-employment benefit

plans; and
(b) post-employment benefits for key management personnel.

125 Where required by Ind AS 37 an entity discloses information about

contingent liabilities arising from post-employment benefit obligations.

Other long-term employee benefits

126 Other long-term employee benefits include, for example:

(a) long-term compensated absences such as long-service or

sabbatical leave;
(b) jubilee or other long-service benefits;
(c) long-term disability benefits;
(d) profit-sharing and bonuses payable twelve months or more
after the end of the period in which the employees render
the related service; and
(e) deferred compensation paid twelve months or more after
the end of the period in which it is earned.

127 The measurement of other long-term employee benefits is not

usually subject to the same degree of uncertainty as the measurement
of post-employment benefits. Furthermore, the introduction of, or
changes to, other long-term employee benefits rarely causes a material
amount of past service cost. For these reasons, this Standard requires
a simplified method of accounting for other long-term employee benefits.
This method differs from the accounting required for post-employment
benefits as follows:

58
 Employee Benefits

(a) [Refer to Appendix 1];

(b) all past service cost is recognised immediately .

Recognition and measurement

128 The amount recognised as a liability for other long-term

employee benefits shall be the net total of the following amounts:

(a) the present value of the defined benefit obligation at

the end of the reporting period (see paragraph 64);
(b) minus the fair value at the end of the reporting period
of plan assets (if any) out of which the obligations are
to be settled directly (see paragraphs 102–104).

In measuring the liability, an entity shall apply paragraphs 49–91,

excluding paragraphs 54 and 61. An entity shall apply paragraph
104A in recognising and measuring any reimbursement right.

129 For other long-term employee benefits, an entity shall

recognise the net total of the following amounts as expense or
income, except to the extent that another Standard requires or
permits their inclusion in the cost of an asset:

(a) current service cost (see paragraphs 63–91);

(b) interest cost (see paragraph 82);
(c) the expected return on any plan assets (see paragraphs
105–107) and on any reimbursement right recognised as
an asset (see paragraph 104A);
(d) [Refer to Appendix 1]
(e) past service cost, which shall all be recognised immediately;
and
(f) the effect of any curtailments or settlements (see paragraphs
109 and 110).

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Indian Accounting Standards

129A In measuring its liability for other long-term employee benefits

in accordance with paragraph 128, an entity shall recognise in other
comprehensive income all of the actuarial gains and losses and
any adjustments arising from the limit in paragraph 58(b) and apply
paragraphs 93B, 93C and 93D.

130 One form of other long-term employee benefit is long-term

disability benefit. If the level of benefit depends on the length of service,
an obligation arises when the service is rendered. Measurement of that
obligation reflects the probability that payment will be required and the
length of time for which payment is expected to be made. If the level of
benefit is the same for any disabled employee regardless of years of
service, the expected cost of those benefits is recognised when an
event occurs that causes a long-term disability.

Disclosure

131 Although this Standard does not require specific disclosures about
other long-term employee benefits, other Standards may require
disclosures, for example, where the expense resulting from such benefits
is material and so would require disclosure in accordance with Ind AS
1. When required by Ind AS 24, an entity discloses information about
other long-term employee benefits for key management personnel.

Termination benefits
132 This Standard deals with termination benefits separately from
other employee benefits because the event which gives rise to an
obligation is the termination rather than employee service.

Recognition

133 An entity shall recognise termination benefits as a liability

and an expense when, and only when, the entity is demonstrably
committed to either:

(a) terminate the employment of an employee or group of

employees before the normal retirement date; or

60
 Employee Benefits

(b) provide termination benefits as a result of an offer made

in order to encourage voluntary redundancy.

134 An entity is demonstrably committed to a termination when,

and only when, the entity has a detailed formal plan for the
termination and is without realistic possibility of withdrawal. The
detailed plan shall include, as a minimum:

(a) the location, function, and approximate number of

employees whose services are to be terminated;
(b) the termination benefits for each job classification or
function; and
(c) the time at which the plan will be implemented.
Implementation shall begin as soon as possible and the
period of time to complete implementation shall be such
that material changes to the plan are not likely.

135 An entity may be committed, by legislation, by contractual or

other agreements with employees or their representatives or by a
constructive obligation based on business practice, custom or a desire
to act equitably, to make payments (or provide other benefits) to
employees when it terminates their employment. Such payments are
termination benefits. Termination benefits are typically lump-sum
payments, but sometimes also include:

(a) enhancement of retirement benefits or of other post-

employment benefits, either indirectly through an employee
benefit plan or directly; and
(b) salary until the end of a specified notice period if the
employee renders no further service that provides economic
benefits to the entity.

136 Some employee benefits are payable regardless of the reason

for the employee’s departure. The payment of such benefits is certain
(subject to any vesting or minimum service requirements) but the timing
of their payment is uncertain. Although such benefits are described in
some countries as termination indemnities, or termination gratuities,
they are post-employment benefits, rather than termination benefits and
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Indian Accounting Standards

an entity accounts for them as post-employment benefits. Some entities

provide a lower level of benefit for voluntary termination at the request
of the employee (in substance, a post-employment benefit) than for
involuntary termination at the request of the entity. The additional benefit
payable on involuntary termination is a termination benefit.

137 Termination benefits do not provide an entity with future economic

benefits and are recognised as an expense immediately.

138 Where an entity recognises termination benefits, the entity may

also have to account for a curtailment of retirement benefits or other
employee benefits (see paragraph 109).

Measurement

139 Where termination benefits fall due more than 12 months after
the reporting period, they shall be discounted using the discount
rate specified in paragraph 78.

140 In the case of an offer made to encourage voluntary

redundancy, the measurement of termination benefits shall be based
on the number of employees expected to accept the offer.

Disclosure

141 Where there is uncertainty about the number of employees who

will accept an offer of termination benefits, a contingent liability exists.
As required by Ind AS 37 an entity discloses information about the
contingent liability unless the possibility of an outflow in settlement is
remote.

142 As required by Ind AS 1, an entity discloses the nature and amount

of an expense if it is material. Termination benefits may result in an
expense needing disclosure in order to comply with this requirement.

143 Where required by Ind AS 24 an entity discloses information about

termination benefits for key management personnel.

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 Employee Benefits

Appendix A
This Appendix, except the portion relating to illustrative examples, is
an integral part of the Standard .

Ind AS 19 —The Limit on a Defined Benefit

Asset, Minimum Funding Requirements and
their Interaction

Background
1 Paragraph 58 of Ind AS 19 limits the measurement of a defined
benefit asset to ‘the present value of economic benefits available in the
form of refunds from the plan or reductions in future contributions to
the plan’ plus unrecognised past service cost. Questions have arisen
about when refunds or reductions in future contributions should be
regarded as available, particularly when a minimum funding requirement
exists.

2 Minimum funding requirements exist in many countries to improve

the security of the post-employment benefit promise made to members
of an employee benefit plan. Such requirements normally stipulate a
minimum amount or level of contributions that must be made to a plan
over a given period. Therefore, a minimum funding requirement may
limit the ability of the entity to reduce future contributions.

3 Further, the limit on the measurement of a defined benefit asset

may cause a minimum funding requirement to be onerous. Normally, a
requirement to make contributions to a plan would not affect the
measurement of the defined benefit asset or liability. This is because
the contributions, once paid, will become plan assets and so the
additional net liability is nil. However, a minimum funding requirement
may give rise to a liability if the required contributions will not be
available to the entity once they have been paid.

3A [Refer to Appendix 1]

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Indian Accounting Standards

Scope
4 This Appendix applies to all post-employment defined benefits
and other long-term employee defined benefits.

5 For the purpose of this Appendix, minimum funding requirements

are any requirements to fund a post-employment or other long-term
defined benefit plan.

Issues
6 The issues addressed in this Appendix are:

(a) when refunds or reductions in future contributions should

be regarded as available in accordance with paragraph 58
of Ind AS 19.
(b) how a minimum funding requirement might affect the
availability of reductions in future contributions.
(c) when a minimum funding requirement might give rise to a
liability.

Principles
Availability of a refund or reduction in future
contributions

7 An entity shall determine the availability of a refund or a reduction

in future contributions in accordance with the terms and conditions of
the plan and any statutory requirements in the jurisdiction of the plan.

8 An economic benefit, in the form of a refund or a reduction in

future contributions, is available if the entity can realise it at some
point during the life of the plan or when the plan liabilities are settled.
In particular, such an economic benefit may be available even if it is
not realisable immediately at the end of the reporting period.

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 Employee Benefits

9 The economic benefit available does not depend on how the

entity intends to use the surplus. An entity shall determine the maximum
economic benefit that is available from refunds, reductions in future
contributions or a combination of both. An entity shall not recognise
economic benefits from a combination of refunds and reductions in future
contributions based on assumptions that are mutually exclusive.

10 In accordance with Ind AS 1 the entity shall disclose information

about the key sources of estimation uncertainty at the end of the
reporting period that have a significant risk of causing a material
adjustment to the carrying amount of the net asset or liability recognised
in the balance sheet. This might include disclosure of any restrictions
on the current realisability of the surplus or disclosure of the basis
used to determine the amount of the economic benefit available.

The economic benefit available as a refund

The right to a refund

11 A refund is available to an entity only if the entity has an

unconditional right to a refund:

(a) during the life of the plan, without assuming that the plan
liabilities must be settled in order to obtain the refund (e.g.
in some jurisdictions, the entity may have a right to a refund
during the life of the plan, irrespective of whether the plan
liabilities are settled); or
(b) assuming the gradual settlement of the plan liabilities over
time until all members have left the plan; or
(c) assuming the full settlement of the plan liabilities in a single
event (i.e. as a plan wind-up).

An unconditional right to a refund can exist whatever the funding level

of a plan at the end of the reporting period.

12 If the entity’s right to a refund of a surplus depends on the

occurrence or non-occurrence of one or more uncertain future events

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Indian Accounting Standards

not wholly within its control, the entity does not have an unconditional
right and shall not recognise an asset.

Measurement of the economic benefit

13 An entity shall measure the economic benefit available as a refund

as the amount of the surplus at the end of the reporting period (being
the fair value of the plan assets less the present value of the defined
benefit obligation) that the entity has a right to receive as a refund, less
any associated costs. For instance, if a refund would be subject to a
tax other than income tax, an entity shall measure the amount of the
refund net of the tax.

14 In measuring the amount of a refund available when the plan is

wound up (paragraph 11(c)), an entity shall include the costs to the
plan of settling the plan liabilities and making the refund. For example,
an entity shall deduct professional fees if these are paid by the plan
rather than the entity, and the costs of any insurance premiums that
may be required to secure the liability on wind-up.

15 If the amount of a refund is determined as the full amount or a

proportion of the surplus, rather than a fixed amount, an entity shall
make no adjustment for the time value of money, even if the refund is
realisable only at a future date.

The economic benefit available as a contribution reduction

16 If there is no minimum funding requirement for contributions

relating to future service, the economic benefit available as a reduction
in future contributions is the future service cost to the entity for each
period over the shorter of the expected life of the plan and the expected
life of the entity. The future service cost to the entity excludes amounts
that will be borne by employees.

17 An entity shall determine the future service costs using

assumptions consistent with those used to determine the defined benefit
obligation and with the situation that exists at the end of the reporting
period as determined by Ind AS 19. Therefore, an entity shall assume
no change to the benefits to be provided by a plan in the future until
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 Employee Benefits

the plan is amended and shall assume a stable workforce in the future
unless the entity is demonstrably committed at the end of the reporting
period to make a reduction in the number of employees covered by the
plan. In the latter case, the assumption about the future workforce shall
include the reduction.

The effect of a minimum funding requirement on the

economic benefit available as a reduction in future
contributions
18 An entity shall analyse any minimum funding requirement at a
given date into contributions that are required to cover (a) any existing
shortfall for past service on the minimum funding basis and (b) future
service.

19 Contributions to cover any existing shortfall on the minimum

funding basis in respect of services already received do not affect future
contributions for future service. They may give rise to a liability in
accordance with paragraphs 23–26.

20 If there is a minimum funding requirement for contributions relating

to the future service, the economic benefit available as a reduction in
future contributions is the sum of:

(a) any amount that reduces future minimum funding

requirement contributions for future service because the
entity made a prepayment (i.e. paid the amount before being
required to do so); and
(b) the estimated future service cost in each period in
accordance with paragraphs 16 and 17 less the estimated
minimum funding requirement contributions that would be
required for future service in those periods if there were no
prepayment as described in (a).

21 An entity shall estimate the future minimum funding requirement

contributions for future service taking into account the effect of any
existing surplus determined using the minimum funding basis but
excluding the prepayment described in paragraph 20(a). An entity shall
use assumptions consistent with the minimum funding basis and, for
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Indian Accounting Standards

any factors not specified by that basis, assumptions consistent with those
used to determine the defined benefit obligation and with the situation
that exists at the end of the reporting period as determined by Ind AS 19.
The estimate shall include any changes expected as a result of the entity
paying the minimum contributions when they are due. However, the
estimate shall not include the effect of expected changes in the terms
and conditions of the minimum funding basis that are not substantively
enacted or contractually agreed at the end of the reporting period.

22 When an entity determines the amount described in paragraph

20(b), if the future minimum funding requirement contributions for future
service exceed the future Ind AS 19 service cost in any given period,
that excess reduces the amount of the economic benefit available as a
reduction in future contributions. However, the amount described in
paragraph 20(b) can never be less than zero.

When a minimum funding requirement may give rise

to a liability

23 If an entity has an obligation under a minimum funding requirement

to pay contributions to cover an existing shortfall on the minimum funding
basis in respect of services already received, the entity shall determine
whether the contributions payable will be available as a refund or
reduction in future contributions after they are paid into the plan.

24 To the extent that the contributions payable will not be available

after they are paid into the plan, the entity shall recognise a liability
when the obligation arises. The liability shall reduce the defined benefit
asset or increase the defined benefit liability so that no gain or loss is
expected to result from applying paragraph 58 of Ind AS 19 when the
contributions are paid.

25 An entity shall apply paragraph 58A of Ind AS 19 before

determining the liability in accordance with paragraph 24.

26 The liability in respect of the minimum funding requirement and

any subsequent remeasurement of that liability shall be recognised
immediately in other comprehensive income.

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 Employee Benefits

Illustrative examples
These examples accompany, but are not part of, Appendix A.

Example 1—Effect of the minimum funding

requirement when there is an Ind AS 19 surplus
and the minimum funding contributions payable
are fully refundable to the entity
IE1 An entity has a funding level on the minimum funding requirement
basis (which is measured on a different basis from that required under
Ind AS 19) of 82 per cent in Plan A. Under the minimum funding
requirements, the entity is required to increase the funding level to 95
per cent immediately. As a result, the entity has a statutory obligation
at the end of the reporting period to contribute Rs 200 to Plan A
immediately. The plan rules permit a full refund of any surplus to the
entity at the end of the life of the plan. The year-end valuations for Plan
A are set out below.

(Amount in Rs.)
Market value of assets 1,200
Present value of defined benefit obligation under Ind AS 19 _______
(1,100)
Surplus 100
_______
_______
Defined benefit asset (before consideration of the
minimum funding requirement) (a) 100
_______
_______

(a) For simplicity, it is assumed that there is no unrecognised past service

cost.

Application of requirements

IE2 Paragraph 24 of Appendix A requires the entity to recognise a

liability to the extent that the contributions payable are not fully available.
Payment of the contributions of Rs 200 will increase the Ind AS 19

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Indian Accounting Standards

surplus from Rs 100 to Rs 300. Under the rules of the plan this amount
will be fully refundable to the entity with no associated costs. Therefore,
no liability is recognised for the obligation to pay the contributions.

Example 2—Effect of a minimum funding

requirement when there is an Ind AS 19 deficit
and the minimum funding contributions payable
would not be fully available
IE3 An entity has a funding level on the minimum funding requirement
basis (which is measured on a different basis from that required under
Ind AS 19) of 77 per cent in Plan B. Under the minimum funding
requirements, the entity is required to increase the funding level to 100
per cent immediately. As a result, the entity has a statutory obligation
at the end of the reporting period to pay additional contributions of Rs
300 to Plan B. The plan rules permit a maximum refund of 60 per cent
of the Ind AS 19 surplus to the entity and the entity is not permitted to
reduce its contributions below a specified level which happens to equal
the Ind AS 19 service cost. The year-end valuations for Plan B are set
out below.

( Amount in Rs.)
Market value of assets 1,000
Present value of defined benefit obligation under Ind AS 19 _______
(1,100)
Deficit (100)
_______
_______
Defined benefit (liability) (before consideration of the
minimum funding requirement) (a) (100)
_______
_______

(a) For simplicity, it is assumed that there is no unrecognised past service

cost.

Application of requirements

IE4 The payment of Rs 300 would change the Ind AS 19 deficit of Rs 100 to
a surplus of Rs 200. Of this Rs 200, 60 per cent (Rs 120) is refundable.

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 Employee Benefits

IE5 Therefore, of the contributions of Rs 300, Rs 100 eliminates the

Ind AS 19 deficit and Rs 120 (60 per cent of Rs 200) is available as an
economic benefit. The remaining Rs 80 (40 per cent of Rs 200) of the
contributions paid is not available to the entity.

IE6 Paragraph 24 of Appendix A requires the entity to recognise a

liability to the extent that the additional contributions payable are not
available to it.

IE7 Therefore, the entity increases the defined benefit liability by Rs

80. As required by paragraph 26 of Appendix A, Rs 80 is recognised
immediately in other comprehensive income and the entity recognises a
net liability of Rs 180 in the balance sheet. No other liability is
recognised in respect of the statutory obligation to pay contributions of
Rs 300.

Summary

(Amount in Rs.)
Market value of assets 1,000
Present value of defined benefit obligation under Ind AS 19 _______
(1,100)
Deficit (100)
_______
_______
Defined benefit liability (before consideration of the
minimum funding requirement) (a) (100)
Adjustment in respect of minimum funding requirement (80)
_______
Net liability recognised in the balance sheet (180)
_______
_______

(a) For simplicity, it is assumed that there is no unrecognised past service

cost.

IE8 When the contributions of Rs 300 are paid, the net asset
recognised in the balance sheet will be Rs 120.

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Indian Accounting Standards

Example 3—Effect of a minimum funding

requirement when the contributions payable
would not be fully available and the effect on
the economic benefit available as a future
contribution reduction
IE9 An entity has a funding level on the minimum funding basis (which
it measures on a different basis from that required by Ind AS 19) of 95
per cent in Plan C. The minimum funding requirements require the entity
to pay contributions to increase the funding level to 100 per cent over
the next three years. The contributions are required to make good the
deficit on the minimum funding basis (shortfall) and to cover future
service.

IE10 Plan C also has an Ind AS 19 surplus at the end of the reporting
period of Rs 50, which cannot be refunded to the entity under any
circumstances. There is no unrecognised past service cost.

IE11 The nominal amounts of contributions required to satisfy the

minimum funding requirements in respect of the shortfall and the future
service for the next three years are set out below.

(Amount in Rs.)
Year Total contributions Contributions Contributions
for minimum funding required to make required to cover
requirement good the shortfall future service
1 135 120 15
2 125 112 13
3 115 104 11

Application of requirements

IE12 The entity’s present obligation in respect of services already

received includes the contributions required to make good the shortfall
but does not include the contributions required to cover future service.

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 Employee Benefits

IE13 The present value of the entity’s obligation, assuming a discount

rate of 6 per cent per year, is approximately Rs 300, calculated as
follows:

[120/(1.06) + 112 /(1.06) 2 + 104/(1.06) 3].

IE14 When these contributions are paid into the plan, the present value
of the Ind AS 19 surplus (i.e. the fair value of assets less the present
value of the defined benefit obligation) would, other things being equal,
increase from Rs 50 to Rs 350 (300 + 50).

IE15 However, the surplus is not refundable although an asset may be

available as a future contribution reduction.

IE16 In accordance with paragraph 20 of Appendix A, the economic

benefit available as a reduction in future contributions is the sum of

(a) any amount that reduces the future minimum funding

requirement contributions for future service because the
entity made a prepayment (i.e. paid the amount before being
required to so); and
(b) the estimated future service cost in each period in
accordance with paragraphs 16 and 17 less the estimated
minimum funding requirement contributions that would be
required for future service in those periods if there were no
prepayment as described in paragraph (a).

IE17 In this example there is no prepayment as described in paragraph

20(a). The amounts available as a reduction in future contributions when
applying paragraph 20(b) are set out below.

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Indian Accounting Standards

(Amount in Rs.)
Year Ind AS 19 Minimum Amount
service cost contributions available as
required to contribution
cover future reduction
service
1 13 15 (2)
2 13 13 0
3 13 11 2
4+ 13 9 4

IE18 Assuming a discount rate of 6 per cent, the present value of the
economic benefit available as a future contribution reduction is equal
to:

(2)/(1.06) + 0/(1.06) 2 + 2/(1.06) 3 + 4/(1.06) 4 + … = 56.

Thus in accordance with paragraph 58(b) of Ind AS 19, the present

value of the economic benefit available from future contribution
reductions is limited to Rs 56.

IE19 Paragraph 24 of Appendix A requires the entity to recognise a

liability to the extent that the additional contributions payable will not
be fully available. Therefore, the entity reduces the defined benefit asset
by Rs 294 (50 + 300 – 56).

IE20 As required by paragraph 26 of Appendix A, the Rs 294 is

recognised immediately in other comprehensive income and the entity
recognises a net liability of Rs 244 in the balance sheet. No other
liability is recognised in respect of the obligation to make contributions
to fund the minimum funding shortfall.

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 Employee Benefits

Summary

(Amount in Rs.)
Surplus 50
_____
_____
Defined benefit asset (before consideration of the
minimum funding requirement) 50
Adjustment in respect of minimum funding requirement (294)
_____
Net liability recognised in the balance sheet (a) (244)
_____
_____

(a) For simplicity, it is assumed that there is no unrecognised past service

cost.

IE21 When the contributions of Rs 300 are paid into the plan, the net
asset recognised in the balance sheet will become Rs 56 (300 – 244).

Example 4—Effect of a prepayment when a

minimum funding requirement exceeds the
expected future service charge
IE22 An entity is required to fund Plan D so that no deficit arises on
the minimum funding basis. The entity is required to pay minimum
funding requirement contributions to cover the service cost in each
period determined on the minimum funding basis.

IE23 Plan D has an Ind AS 19 surplus of Rs 35 at the beginning of 20X1.

There are no cumulative unrecognised past service costs. This example
assumes that the discount rate and expected return on assets are 0 per cent,
and that the plan cannot refund the surplus to the entity under any circumstances
but can use the surplus for reductions of future contributions.

IE24 The minimum contributions required to cover future service are

Rs 15 for each of the next five years. The expected Ind AS 19 service
cost is Rs 10 in each year.

IE25 The entity makes a prepayment of Rs 30 at the beginning of

20X1 in respect of years 20X1 and 20X2, increasing its surplus at the
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Indian Accounting Standards

beginning of 20X1 to Rs 65. That prepayment reduces the future

contributions it expects to make in the following two years, as follows:

(Amount in Rs.)
Year Ind AS 19 Minimum funding Minimum
service cost requirement funding
contribution requirement
before contribution
prepayment after
prepayment
20X1 10 15 0
20X2 10 15 0
20X3 10 15 15
20X4 10 15 15
20X5 10 15 15
Total 50 75 45

Application of requirements

IE26 In accordance with paragraphs 20 and 22 of Appendix A, at the

beginning of 20X1, the economic benefit available as a reduction in
future contributions is the sum of:

(a) Rs 30, being the prepayment of the minimum funding

requirement contributions; and
(b) nil. The estimated minimum funding requirement
contributions required for future service would be Rs 75 if
there was no prepayment. Those contributions exceed the
estimated future service cost (Rs 50); therefore the entity
cannot use any part of the surplus of Rs 35 noted in
paragraph IE23 (see paragraph 22).

IE27 Assuming a discount rate of 0 per cent, the present value of the
economic benefit available as a reduction in future contributions is equal
to Rs 30. Thus in accordance with paragraph 58 of Ind AS 19 the entity
recognises an asset of Rs 30 (because this is lower than the Ind AS 19
surplus of Rs 65).

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 Employee Benefits

Appendix B

Illustrative example
The appendix accompanies, but is not part of, Ind AS 19.

Extracts from statements of profit and loss and balance sheets are
provided to show the effects of the transactions described below. These
extracts do not necessarily conform with all the disclosure and
presentation requirements of other Standards.

Background information
The following information is given about a funded defined benefit plan.
To keep interest computations simple, all transactions are assumed to
occur at the year-end. The present value of the obligation and the fair
value of the plan assets were both Rs 1,000 at 1 January 20X1. Net
cumulative actuarial gain recognised in other comprehensive income as
of 1 January 20X1 was Rs 100.
(Amount in Rs.)
20X1 20X2 20X3
Discount rate at start of year 10.0% 9.0% 8.0%
Expected rate of return on plan assets at
start of year 12.0% 11.1% 10.3%
Current service cost 130 140 150
Benefits paid 150 180 190
Contributions paid 90 100 110
Present value of obligation at 31 December 1,141 1,197 1,295
Fair value of plan assets at 31 December 1,092 1,109 1,093
Expected average remaining working
lives of employees (years) 10 10 10

In 20X2, the plan was amended to provide additional benefits with effect
from 1 January 20X2. The present value as at 1 January 20X2 of
additional benefits for employee service before 1 January 20X2 was Rs
50 for vested benefits and Rs 30 for non-vested benefits. As at 1 January
20X2, the entity estimated that the average period until the non-vested
benefits would become vested was three years; the past service cost
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Indian Accounting Standards

arising from additional non-vested benefits is therefore recognised on a

straight-line basis over three years. The past service cost arising from
additional vested benefits is recognised immediately (paragraph 96 of
the Standard).

Changes in the present value of the obligation and in

the fair value of the plan assets

The first step is to summarise the changes in the present value of the
obligation and in the fair value of the plan assets and use this to
determine the amount of the actuarial gains or losses for the period.
These are as follows:
(Amount in Rs.)
20X1 20X2 20X3
Present value of obligation, 1 January 1,000 1,141 1,197
Interest cost 100 103 96
Current service cost 130 140 150
Past service cost—non-vested benefits – 30 –
Past service cost—vested benefits – 50 –
Benefits paid (150) (180) (190)
Actuarial (gain) loss on obligation
(balancing figure) ______61 ______
(87) ______ 42
Present value of obligation, 31 December ______
1,141 1,197
______ 1,295
______
______ ______ ______
Fair value of plan assets, 1 January 1,000 1,092 1,109
Expected return on plan assets 120 121 114
Contributions 90 100 110
Benefits paid (150) (180) (190)
Actuarial gain (loss) on plan assets
(balancing figure) 32
______ (24)
______ (50)
______
Fair value of plan assets, 31 December 1,092
______ 1,109
______ 1,093
______
______ ______ ______
Net actuarial gains (losses) to be
recognised immediately in other
comprehensive income (29) 63 (92)
______ ______ ______

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 Employee Benefits

Amounts recognised in the balance sheet , profit or

loss, other comprehensive income and related
analyses

The final step is to determine the amounts to be recognised in the

balance sheet and profit or loss, and the related analyses to be disclosed
in accordance with paragraph 120A(f), (g), (h), (i) and (m) of the
Standard (the analyses required to be disclosed in accordance with
paragraph 120A(c) and (e) are given in the section of this Appendix
‘Changes in the present value of the obligation and in the fair value of
the plan assets’). These are as follows.
(Amount in Rs.)
20X1 20X2 20X3
Present value of the obligation 1,141 1,197 1,295
Fair value of plan assets (1,092) (1,109) (1,093)
_______ _______ _______
49 88 202
Unrecognised past service cost—non-vested
benefits – (20) (10)
Liability recognised in balance sheet _______ 49 _______
68 _______
192
_______ _______ _______
Current service cost 130 140 150
Interest cost 100 103 96
Expected return on plan assets (120) (121) (114)
Past service cost—non-vested benefits – 10 10
Past service cost—vested benefits _______ _______ _______–
– 50
Expense recognised in profit or loss _______ 110 182 142
_______ _______
_______ _______
_______
Net actuarial (gain) loss recognised in other
comprehensive income in year _______29 _______
(63) _______
92
Cumulative actuarial (gain)loss recognised
in other comprehensive income (71) _______
_______ (134) _______
(42)
Actual return on plan assets
Expected return on plan assets 120 121 114
Actuarial gain (loss) on plan assets 32 _______
_______ (24) _______
(50)
Actual return on plan assets 152
_______ 97 64
_______ _______
_______ _______
_______
Note: see example illustrating paragraphs 104A–104C for presentation
of reimbursements.
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Indian Accounting Standards

Appendix C

Illustrative disclosures
This appendix accompanies, but is not part of, Ind AS 19. Extracts from
notes show how the required disclosures may be aggregated in the
case of a large multi-national group that provides a variety of employee
benefits. These extracts do not necessarily conform with all the
disclosure and presentation requirements of Ind AS 19 and other
Standards. In particular, they do not illustrate the disclosure of:

(a) accounting policies for employee benefits (see Ind AS 1

Presentation of Financial Statements ). Paragraph 120A(a)
of the Standard requires this disclosure to include the entity’s
accounting policy for recognising actuarial gains and losses.
(b) a general description of the type of plan (paragraph
120A(b)).
(c) cumulative amounts recognised in other comprehensive
income (paragraph 120A (i))
(d) a narrative description of the basis used to determine the
overall expected rate of return on assets (paragraph
120A(l)).
(e) employee benefits granted to directors and key management
personnel (see Ind AS 24 Related Party Disclosures ) .
(f) share-based employee benefits (see Ind AS 102 Share-
based Payment).

Employee Benefit Obligations

The amounts (in Rs.) recognised in the balance sheet are as follows:

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 Employee Benefits

Defined benefit Post-employment

pension plans medical benefits
20X2 20X1 20X2 20X1
Present value of funded
obligations 20,300 17,400 – –
Fair value of plan assets _______ _______ _______ _______–
(18,420) (17,280) –
1,880 120 – –
Present value of unfunded
obligations 2,000 1,000 7,337 6,405
Unrecognised past service cost_______
(450) _______ _______ _______–
(650) –
Net liability 3,430
_______ 470 7,337 6,405
_______ _______ _______
Amounts in the balance sheet:
liabilities 3,430 560 7,337 6,405
assets – (90) – –
Net liability 3,430
_______ 470 7,337 6,405
_______ _______ _______

The pension plan assets include ordinary shares 1 issued by [name of

reporting entity] with a fair value of Rs 317 (20X1: 281). Plan assets
also include property occupied by [name of reporting entity] with a fair
value of Rs 200 (20X1: 185).

The amounts (in Rs.) recognised in profit or loss and other

comprehensive income are as follows:

Defined benefit Post-employment

pension plans medical benefits
20X2 20X1 20X2 20X1
Current service cost 850 750 479 411
Interest on obligation 950 1,000 803 705
Expected return on plan assets (900) (650)
Past service cost 200 200
Losses (gains) on curtailments
and settlements 175
______ (390)
______ ______ ______
Total, included in ‘employee
benefits expense’ 1,275
______ 910
______ 1,282
______ 1,116
______
1
In Indian context, the term ‘ordinary shares’ is equivalent to ‘equity shares’.

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Indian Accounting Standards

Net actuarial losses (gains)

recognised in other comprehensive
income in year 2,650
______ (650)
______ 250
______ 400
______
Actual return on plan assets 600
______ 2,250
______ ______– ______–

Changes in the present value of the defined benefit obligation are as

follows:

(Amount in Rs.)
Defined benefit Post-employment
pension plans medical benefits
20X2 20X1 20X2 20X1
Opening defined benefit
obligation 18,400 11,600 6,405 5,439
Service cost 850 750 479 411
Interest cost 950 1,000 803 705
Actuarial losses (gains) 2,350 950 250 400
Losses (gains) on curtailments (500) –
Liabilities extinguished on
settlements – (350 )
Liabilities assumed in a business
combination – 5,000
Exchange differences on foreign
plans 900 (150 )
Benefits paid (650)
______ (400)
______ (600) ______
______ (550)
Closing defined benefit
obligation 22,300 18,400 7,337 6,405
______ ______ ______ ______

Changes in the fair value of plan assets are as follows:

(Amount in Rs.)
Defined benefit
pension plans
20X2 20X1
Opening fair value of plan assets 17,280 9,200
Expected return 900 650
Actuarial gains and (losses) (300) 1,600
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 Employee Benefits

Assets distributed on settlements (400) –

Contributions by employer 700 350
Assets acquired in a business combination – 6,000
Exchange differences on foreign plans 890 (120)
Benefits paid (650)
_______ (400)
_______
18,420
_______ 17,280
_______

The group expects to contribute Rs 900 to its defined benefit pension

plans in 20X3.

The major categories of plan assets as a percentage of total plan assets

are as follows:
20X2 20X1
European equities 30% 35%
North American equities 16% 15%
European bonds 31% 28%
North American bonds 18% 17%
Property 5% 5%

Principal actuarial assumptions at the end of the reporting period

(expressed as weighted averages):
20X2 20X1
Discount rate at 31 December 5.0% 6.5%
Expected return on plan assets at 31 December 5.4% 7.0%
Future salary increases 5% 4%
Future pension increases 3% 2%
Proportion of employees opting for early retirement 30% 30%
Annual increase in healthcare costs 8% 8%
Future changes in maximum state healthcare benefits 3% 2%

Assumed healthcare cost trend rates have a significant effect on the

amounts recognised in profit or loss. A one percentage point change in
assumed healthcare cost trend rates would have the following
effects:

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Indian Accounting Standards

(Amount in Rs.)
One percentage One percentage
point increase point decrease
Effect on the aggregate of
the service cost and interest cost 190 (150)
Effect on defined benefit obligation 1,000 (900)

Amounts for the current and previous four periods are as follows:

Defined benefit pension plans

(Amount in Rs.)
20X2 20X1 20X0 20W9 20W8
Defined benefit
obligation (22,300) (18,400) (11,600) (10,582) (9,144)
Plan assets 18,420 17,280 9,200 8,502 10,000
Surplus/(deficit) (3,880) (1,120) (2,400) (2,080) 856
Experience
adjustments on
plan liabilities (1,111) (768) (69) 543 (642)
Experience
adjustments on
plan assets (300) 1,600 (1,078) (2,890) 2,777

Post-employment medical benefits

(Amount in Rs.)
20X2 20X1 20X0 20W9 20W8
Defined benefit
obligation 7,337 6,405 5,439 4,923 4,221
Experience
adjustments on
plan liabilities (232) 829 490 (174) (103)

The group also participates in an industry-wide defined benefit plan

that provides pensions linked to final salaries and is funded on a pay-
as-you-go basis. It is not practicable to determine the present value of

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 Employee Benefits

the group’s obligation or the related current service cost as the plan
computes its obligations on a basis that differs materially from the basis
used in [name of reporting entity]’s financial statements. [describe basis]
On that basis, the plan’s financial statements to 30 June 20X0 show an
unfunded liability of Rs 27,525. The unfunded liability will result in future
payments by participating employers. The plan has approximately 75,000
members, of whom approximately 5,000 are current or former employees
of [name of reporting entity] or their dependants. The expense
recognised in profit or loss, which is equal to contributions due for the
year, and is not included in the above amounts, was Rs 230 (20X1:
215). The group’s future contributions may be increased substantially if
other entities withdraw from the plan.

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Appendix D

Illustration of the application of paragraph 58A

The appendix accompanies, but is not part of, Ind AS 19.Throughout
this Appendix, the term ‘past service cost’ means non-vested past service
cost to be amortised in accordance with paragraph 96 of Ind AS 19.

The issue
Paragraph 58 of the Standard imposes a ceiling on the defined benefit
asset that can be recognised.

58 The amount determined under paragraph 54 may be negative

(an asset). An entity shall measure the resulting asset at the lower of:

(a) the amount determined under paragraph 54 [i.e. the

surplus/deficit in the plan plus (minus) any unrecognised
past service cost]; and
(b) the total of:
(i) any cumulative unrecognised past service cost (see
paragraph 96); and
(ii) the present value of any economic benefits
available in the form of refunds from the plan or
reductions in future contributions to the plan. The
present value of these economic benefits shall be
determined using the discount rate specified in
paragraph 78.

Without paragraph 58A (see below), paragraph 58(b)(i) has the following
consequence: sometimes deferring the recognition of a past service
cost in determining the amount specified by paragraph 54 leads to a
gain being recognised in other comprehensive income .

The following example illustrates the effect of applying paragraph 58

without paragraph 58A.

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 Employee Benefits

Example 1

(Amount in Rs.)
A B C D=A+C E=B+C F= lower G
of D and
E
Year Surplus Economic Past service Paragraph Paragraph Asset Gain
in plan benefits cost 54 58(b) ceiling, i.e. re-
available unrecognised re- cognised
(paragraph under cognised in year 2
58(b) (ii)) paragraph 54 asset
1 100 0 0 100 0 0 –
2 70 0 30 100 30 30 30

At the end of year 1, there is a surplus of Rs 100 in the plan (column A

in the table above), but no economic benefits are available to the entity
either from refunds or reductions in future contributions* (column B).
There is no unrecognised past service cost under paragraph 54 (column
C). So, if there were no asset ceiling, an asset of Rs 100 would be
recognised, being the amount specified by paragraph 54 (column D).
The asset ceiling in paragraph 58 restricts the asset to nil (column F).

In year 2 there is a past service cost in the plan of Rs 30 that reduces

the surplus from Rs 100 to Rs 70 (column A) the recognition of which is
deferred under paragraph 54 (column C). So, if there were no asset
ceiling, an asset of Rs 100 (column D) would be recognised. The asset
ceiling without paragraph 58A would be Rs 30 (column E). An asset of
Rs 30 would be recognised (column F), giving rise to a gain in other
comprehensive income (column G) even though all that has happened
is that a surplus from which the entity cannot benefit has decreased.

Paragraph 58A
Paragraph 58A prohibits the recognition of gains that arise solely
from past service cost.

* based on the current terms of the plan.

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58A The application of paragraph 58 shall not result in a gain

being recognised solely as a result of a past service cost in the
current period. The entity shall therefore recognise immediately
under paragraph 54 the following, to the extent that it arises while
the defined benefit asset is determined in accordance with
paragraph 58(b)

(a) past service cost of the current period to the extent that
it exceeds any reduction in the present value of the
economic benefits specified in paragraph 58(b) (ii). If
there is no change or an increase in the present value
of the economic benefits, the entire past service cost of
the current period shall be recognised immediately under
paragraph 54.
(b) [Refer to Appendix 1]

Examples
The following examples illustrate the result of applying paragraph 58A.
For the sake of simplicity the periodic amortisation of unrecognised
past service cost is ignored in the examples.

Example 1 continued – Adjustment when there is past service cost and

no change in the economic benefits available

(Amount in Rs.)
A B C D=A+C E=B+C F= lower G
of D and
E
Year Surplus Economic Past service Paragraph Paragraph Asset Gain
in plan benefits cost 54 58(b) ceiling, i.e. re-
available unrecognised re- cognised
(paragraph under cognised in year 2
58(b) (ii)) paragraph 54 asset
1 100 0 0 100 0 0 –
2 70 0 0 70 0 0 0

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 Employee Benefits

The facts are as in example 1 above. Applying paragraph 58A, there is

no change in the economic benefits available to the entity* so the
entire past service cost of Rs 30 is recognised immediately under
paragraph 54 (column D). The asset ceiling remains at nil (column F)
and no gain is recognised.

In effect, the past service cost of Rs 30 is recognised immediately, but

is offset by the reduction in the effect of the asset ceiling.

(Amount in Rs.)
Balance sheet Effect of the Asset ceiling
asset under asset ceiling (column
paragraph 54 F above)
(column D above)
Year 1 100 (100) 0
Year 2 70 (70) 0
Gain/(loss) (30) 30 0

In the above example, there is no change in the present value of the economic
benefits available to the entity. The application of paragraph 58A becomes
more complex when there are changes in present value of the economic benefits
available, as illustrated in the following examples.

Example 2 – Adjustment when there is past service cost and a

decrease in the economic benefits available
(Amount in Rs.)
A B C D=A+C E=B+C F= lower G
of D and
E
Year Surplus Economic Past service Paragraph Paragraph Asset Gain
in plan benefits cost 54 58(b) ceiling, ie re-
available unrecognised re- cognised
(paragraph under cognised in year 2
58(b) (ii)) paragraph 54 asset
1 60 30 40 100 70 70 –
2 25 20 50 75 70 70 0

* The term ‘economic benefits available to the entity’ is used to refer to those
economic benefits that qualify for recognition under paragraph 58(b)(ii).

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Indian Accounting Standards

At the end of year 1, there is a surplus of Rs 60 in the plan (column A)

and economic benefits available to the entity of Rs 30 (column B).
There is an unrecognised past service cost of Rs 40 under paragraph
54* (column C). So, if there were no asset ceiling, an asset of Rs 100
would be recognised (column D). The asset ceiling restricts the asset
to Rs 70 (column F).

In year 2, an unrecognised past service cost of 35 in the plan reduces

the surplus from Rs 60 to Rs 25 (column A). The economic benefits
available to the entity fall by Rs 10 from Rs 30 to Rs 20 (column B).
Applying paragraph 58A, the unrecognised past service cost of Rs 35 is
analysed as follows:

(Amount in Rs.)
Past service cost equal to the reduction in
economic benefits 10
Past service cost that exceeds the reduction in
economic benefits 25

In accordance with paragraph 58A, Rs 25 of the past service cost is

recognised immediately under paragraph 54 (column D). The reduction
in economic benefits of Rs 10 is included in the cumulative unrecognised
past service cost that increases to Rs 50 (column C). The asset ceiling,
therefore, also remains at Rs 70 (column E) and no gain is recognised.

In effect, a past service cost of Rs 25 is recognised immediately, but is

offset by the reduction in the effect of the asset ceiling.

* The application of paragraph 58A allows the recognition of some past service
costs to be deferred under paragraph 54 and, hence, to be included in the
calculation of the asset ceiling. For example, cumulative unrecognised past
service cost that have built up while the amount specified by paragraph 58(b)
is not lower than the amount specified by paragraph 54 will not be recognised
immediately at the point that the amount specified by paragraph 58(b) becomes
lower. Instead its recognition will continue to be deferred in line with paragraph
96. The cumulative unrecognised past service cost in this example is past
service cost the recognition of which is deferred even though paragraph 58A
applies.

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 Employee Benefits

(Amount in Rs.)
Balance sheet Effect of the Asset ceiling
asset under asset ceiling (column
paragraph 54 F above)
(column D above)
Year 1 100 (30) 70
Year 2 75 (5) 70
Gain/(loss) (25) 25 0

Example 3-[Refer to Appendix 1]

Example 4 – Adjustment in a period in which the asset ceiling ceases

to have an effect

(Amount in Rs.)
A B C D=A+C E=B+C F= lower G
of D and
E
Year Surplus Economic Past service Paragraph Paragraph Asset Gain
in plan benefits cost 54 58(b) ceiling, i.e. re-
available unrecognised re- cognised
(paragraph under cognised in year 2
58(b) (ii)) paragraph 54 asset
1 60 25 40 100 65 65 –
2 (50) 0 115 65 115 65 0

At the end of year 1 there is a surplus of Rs 60 in the plan (column A)

and economic benefits are available to the entity of Rs 25 (column B).
There is an unrecognised past service cost of Rs 40 under paragraph
54 that arose before the asset ceiling had any effect (column C). So, if
there were no asset ceiling, an asset of 100 would be recognised (column
D). The asset ceiling restricts the asset to Rs 65 (column F).

In year 2, a past service cost of Rs 110 in the plan reduces the surplus
from Rs 60 to a deficit of Rs 50 (column A). The economic benefits
available to the entity decrease from Rs 25 to Rs 0 (column B). To
apply paragraph 58A it is necessary to determine how much of the past
service cost arises while the defined benefit asset is determined in
accordance with paragraph 58(b). Once the surplus becomes a deficit,

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Indian Accounting Standards

the amount determined by paragraph 54 is lower than the net total

under paragraph 58(b). So, the past service cost that arises while the
defined benefit asset is determined in accordance with paragraph 58(b)
is the past service cost that reduces the surplus to nil, ie Rs 60. The
past service cost is, therefore, analysed as follows:

(Amount in Rs.)
Past service cost that arises while the defined benefit
asset is measured under paragraph 58(b):
Past service cost that equals the reduction in economic benefits 25
Past service cost that exceeds the reduction in economic benefits ____
35
60
Past service cost that arises while the defined benefit asset is
measured under paragraph 54 50
____
Total past service cost 110
____

In accordance with paragraph 58A, Rs 35 of the past service cost is

recognised immediately under paragraph 54 (column D); Rs 75 (25 + 50)
of the past service cost is included in the cumulative unrecognised past
service cost which increases to Rs 115 (column C). The amount
determined under paragraph 54 becomes Rs 65 (column D) and under
paragraph 58(b) becomes Rs 115 (column E). The recognised asset is
the lower of the two, i.e. Rs 65 (column F), and no gain or loss is
recognised (column G).

In effect, a past service cost of Rs 35 is recognised immediately, but is

offset by the reduction in the effect of the asset ceiling.

(Amount in Rs.)
Balance sheet Effect of the Asset ceiling
asset under asset ceiling (column
paragraph 54 F above)
(column D above)
Year 1 100 (35) 65
Year 2 65 0 65
Gain/(loss) (35) 35 0

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Notes
1 In applying paragraph 58A in situations when there is an increase in
the present value of the economic benefits available to the entity, it is
important to remember that the present value of the economic benefits
available cannot exceed the surplus in the plan.
2 In practice, benefit improvements often result in a past service cost and
an increase in expected future contributions due to increased current
service costs of future years. The increase in expected future
contributions may increase the economic benefits available to the entity
in the form of anticipated reductions in those future contributions. The
prohibition against recognising a gain solely as a result of past service
cost in the current period does not prevent the recognition of a gain
because of an increase in economic benefits.

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Indian Accounting Standards

Appendix E

References to matters contained in other Indian

Accounting Standards
This Appendix is an integral part of Ind AS 19 .

This appendix lists the appendices which are part of other Indian
Accounting Standards and makes reference to Ind AS 19, Employee
Benefits

1 Appendix A. Consolidation- Special Purpose Entities contained in

Ind AS 27, Consolidated and Separate Financial Statements.

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 Employee Benefits

Appendix 1
Note: This Appendix is not a part of the Accounting Standard. The
purpose of this Appendix is only to bring out the differences, if
any, between Indian Accounting Standard (Ind AS) 19 and the
corresponding International Accounting Standard (IAS) 19, Employee
Benefits and IFRIC 14, Ind As 19 — The limit on a Defined Benefit
Assets, minimum Funding Requirements and their Interaction.

Comparison with IAS 19, Employee Benefits

and IFRIC 14
1 IAS 19 permits various options for treatment of actuarial
gains and losses for post-employment defined benefit plans whereas
Ind AS 19 requires recognition of the same in other comprehensive
income, both for post-employment defined benefit plans and other
long-term employment benefit plans. The actuarial gains recognised
in other comprehensive income should be recognised immediately
in retained earnings and should not be reclassified to profit or
loss in a subsequent period. Changes consequent to the aforesaid
have been made in the other paragraphs, including addition of a
new paragraph 129A.. Further,the following paragraphs of IAS 19
which are with reference to the options for the treatment of actuarial
gains or losses for post-employment options have been deleted in
Ind AS 19. In order to maintain consistency with paragraph numbers
of IAS 19, the paragraph numbers are retained in Ind AS 19:

(i) Paragraph 54(b)

(ii) Paragraph 58A (b)
(iii) Paragraph 61 (d)
(iv) Paragraph 61 (g)
(v) Paragraph 93
(vi) Paragraph 93A
(vii) Paragraph 95
(viii) Paragraph 108 (c)
(ix) Paragraph 120A (f) (i)
(x) Paragraph 120A (g) (v)

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Indian Accounting Standards

(xi) Paragraph 120A (g) (viii)

(xii) Paragraph 127 (a)
(xiii) Paragraph 129(d)
(xiv) Paragraph 58A (b) in ‘The Issue’ contained in Appendix D
(xv) Example 3 contained in Appendix D

2 The transitional provisions given in IAS 19 have not been given

in Ind AS 19, since all transitional provisions related to Ind ASs, wherever
considered appropriate have been included in Ind AS 101, First-time
Adoption of Indian Accounting Standards corresponding to IFRS 1, First-
time Adoption of International Financial Reporting Standards.

3 The Ind AS 19 unlike IAS 19 gives guidance that detailed actuarial

valuation of defined benefit obligations may be made at intervals not
exceeding three years.

4 According to Ind AS 19 the rate to be used to discount post-

employment benefit obligation shall be determined by reference to the
market yields on government bonds, whereas under IAS 19, the
government bonds can be used only where there is no deep market of
high quality corporate bonds.

5 Different terminology is used in this standard, e.g., the term

‘balance sheet’ is used instead of ‘Statement of financial position’ and
‘Statement of profit and loss’ is used instead of ‘Statement of
comprehensive income’. The words ‘approval of the financial statements
for issue have been used instead of ‘authorisation of the financial
statements for issue’ in the context of financial statements considered
for the purpose of events after the reporting period.

6 Paragraph number 35 appears as ‘Deleted’ in IAS 19. In order to

maintain consistency with paragraph numbers of IAS 19, the paragraph
number is retained in Ind AS 19.

7 Paragraph 3A of Appendix A is deleted as this paragraph deals

with reason for amending IFRIC 14, which is irrelevant for Appendix A
to Ind AS 19.
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 Employee Benefits

8 To illustrate treatment of gratuity subject to ceiling under Indian

Gratuity Rules , an example has been added in paragraph 70.

9 Example illustrating application of paragraph 60 in IAS 19 has

been deleted in Ind AS 19 as it also dealt with the transitional provisions
which are not given in this Standard.

97