The objective of this Standard is to prescribe the accounting and disclosure for employee benefits.rnEmployee benefits are all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment.rnThe standard requires to recognizernA liability — When an employee has provided service in exchange for employee benefits to be paid in the future.rnAn expense — When the entity consumes the economic benefit arising from service provided by an employee in exchange for employee benefits.rnWhat are the types of employee benefits?rnShort-term BenefitsrnShort-term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services.rnExample: Wages, salaries, paid annual leave, paid sick leave etc.rnOther Long-term Employee BenefitsrnAll employee benefits other than short-term employee benefits, post-employment benefits and termination benefits.rnExample: Sabbatical leave, long term paid absences, long service benefits etc.rnPost-employment BenefitsrnPost-employment benefits are employee benefits (other than termination benefits and short term employee benefits) that 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.rnExample: Pensions, lump sum payment on retirement, post-employment life insurance & medical care.rnTermination benefits are employee benefits provided in exchange for the termination of an employee’s employment.rnHow to account for short term employee benefits?rnWhen an employee has rendered service to an entity during an accounting period, the entity shall recognize an expense & record a liability to be paid to the employee.rnShort term employee expenses a/c DrrnLiability a/c CrrnIf the service by employee is rendered in the construction of an asset (inventories or property, plant & equipment).rnAsset a/c DrrnLiability a/c CrrnHow to account for other long-term benefits?rnThe standard requires re-measurement of other long-term benefits in profit & loss a/c after accounting for the following.rnService cost;rnNet interest on the net defined benefit liability (asset); andrnRemeasurements of the net defined benefit liability (asset).rnProfit & loss a/cAssetsLiabilitiesOpening balanceDrCrBenefits paid outCrDrInterest expenseDrCrInterest incomeCrDrCurrent Service CostDrCrPast service CostDrCrContributions paidDrRe-measurement Net balanceBalancing figureBalancing figureClosing balancesDrCrrnA service cost is recognized for each year of long term benefit charged to profit & loss a/c.rnA contribution to a fund to be in a position to settle the liability, by setting up a plan asset, which earns interest at the end of each year recognized as income in profit & loss a/c.rnThe liability is the discounted value at each year, followed with unwinding of discount, resulting in interest charge to profit & loss a/c.rnThe liability reduces if any benefits paid out from plan assets.rnWhat are ways in which post-employment benefit plans are structured?rnThere are two ways of settling post-employment benefitsrnDefined Contribution plans (Limited liability of employer making a fixed contribution to fund, actuarial or investment risk of employee)rnDefined Benefit plans (Employer liable to make up for the shortfall with an agreed defined benefit for each year of completed service)rnHow to account for post-employment defined contribution plans?rnThe accounting for post-employment benefit plans is dependent on the risk associated with the liability.rnThe employer pays a fixed contribution to the fund, and howsoever the fund performs, the amount is paid to the employee as post-employment benefit. The risk of gain/loss in the fund belongs to the employee with a limited liability for the employer. This is known as Defined Contribution plan.rnWhen an employee has rendered service to an entity during an accounting period, the entity shall recognize an expense & record a liability to be paid to the employee.rnDefined contribution expense a/c DrrnLiability a/c CrrnIf the service by employee is rendered in the construction of an asset (inventories or property, plant & equipment).rnAsset a/c DrrnLiability a/c CrrnA fund is set up by making contribution to the fund at the end of each year.rnPlan assets a/c DrrnCash a/c CrrnInvestment returnsrnPlan assets a/c DrrnInvestment income a/c CrrnOn settlement of liabilityrnLiability a/c DrrnPlan assets a/c CrrnIn consequence, actuarial risk (that benefits will be less than expected) and investment risk (that assets invested will be insufficient to meet expected benefits) fall, in substance, on the employee.rnTO KNOW MORE ABOUT post-employment defined benefit plans VISIT TAKSHILA LEARNING….rnVisit our IFRS Course BLOG SECTION to explore more topics.rnLearn IAS 19 / Ind AS 19 Employee BenefitsrnTakshila Learning also offers an DipIFRS Course which is also one of our Best Selling Courses. 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