AS-15( REVISED 2005) EMPLOYEE’S BENEFITS
AS-15 (Revised 2005 – Employee’s Benefit) BASIC PRINCIPLE -Recognize the expenses of benefit to employees during their service Period, which may be paid. CC urrently, OO n Retirement, or PP ost Retirement
AS-15 (REVISED EMPLOYEE’S BENEFITS) APPLICABILITY With effect from accounting period commencing on or after Level I Enterprises -in entirety Other than level I Enterprises - para 11 to 16, 46 having 50 or more employees and 139 not applicable para 50 to 116 limited applicability less than 50 employees - do – instead of actuarial valuation, some other method may be used.
AS-15(Revised 2005-Employees Benefits) SCOPE -It Covers all employee Benefits as per – Formal agreement Legislative requirement Informal practice -It does not cover Profit Sharing Plans & Employee benefit Plans e.g., ESOP
AS 15(Revised Employee’s Benefit) NATURE OF BENEFITS -Short term employees Benefits: (payable within 12 months after providing Services) - Wages, Salaries - Leave Compensation - Bonus - Non Monetary Benefits -Post Employment Benefits : - Gratuity - Pension/Superannuation - Provident Fund - Medical Facilities
- Other long term Employee Benefits : ( Payable after 12 months of providing service) - Long Service Leaves - Bonuses - Deferred Compensation - Termination Benefits : Compensations and other benefits on termination or pre mature retirement.
Short Term Employee Benefits Salaries, wages and other non-monetary Benefits: - To Account for in Current Period - Not To Discount Leaves : Fully Encashable - Full Provision Lapsing - No Provision Accumulating - Provision for Expected Liabilities Bonus : May be contingent upon future service To provide for expected liability.
Post Employment Benefits Defined Contribution Plans Defined Benefit Plans
Defined Contribution Plans -L-Liability of Enterprise : Periodic Contribution e.g. Provident Fund. - On Retirement Employee gets : Accumulated Contribution and Appreciation of Fund.
Defined Benefit Plans – Benefit on Retirement or Post Retirement - Expense to be provided during service period of the employee. Liability for Expense: Unfunded Funded - State Fund - Trust Fund - Insurance Fund - Mutual Fund ( To Create Plan Asset)
Group Gratuity Scheme of Insurers Whether Defined Contribution Plan ? Whether it provides insurance cover? Or It is only a plan Asset ?
Non Vesting Benefits also to be provided : e.g. Gratuity payable after completion of five year of service but to be provided from Ist Year
AS 15(Revised Employee’s Benefit) Defined Benefit Plans Estimation of liability of Benefits : Using Actuarial assumptions Discounting to Determine present Value (A) : Using Projected Unit credit Method. Determine Fair Value of Plan Assets (B) Difference of A-B to be carried in Balance Sheet as Defined Benefit Liability.
AS 15(Revised Employee’s Benefit) Defined Benefit Plans Expenses to be provided in P&l Account to Constitute : - Current Service Cost - Interest Cost - Expected Return on plan asset - Actuarial gain or losses - Past Service Cost - Effect of any curtailment or settlement
Actuarial Assumptions Demographic - Mortality - Employee Turnover Financial - Future Salary increase - Discount rate - Return on plan asset - Medical Treatment Cost - Change in cost of Medical Services Discount rate to be as per return on Government Bonds
Special Features of Revised AS-15 Disclosure of Different Components of cost to be charged to P& L Account. Disclosure and break up of actuarial assumptions. Discounting Rates as per yield on Government Bonds. Actuarial Assumptions may be reviewed by Management/ Auditors. Benefit Obligations and plan asset to be separately disclosed. Management of plan assets is separately reflected.
Disclosures Nature of Defined Benefit plans and effect of changes if any. Break up and reconciliation of different components of defined benefit obligation. Break up and reconciliation of different components or plan assets and return on assets. Expenses recognized in P& L Account in different components. Main Actuarial assumptions used.
Termination Benefits: - To be Accounted for expenses immediately. - VRS is a termination benefit. - In case of VRS transitional provisions.
Transitional provisions: - Liability to be recognized as per revised AS-15 as on , to be adjusted against revenue reserves. - Liability as per pre-revised AS- 15 shall be prior period expense. - VRS up to : After that in the year of incurrence.
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