Settlement upon the Occurrence of a
asset (e.g. where employee costs are capitalised
Contingent Event.
as part of the cost of PP&E or inventories).
27 FASB ASC 718 – Compensation – Stock
11 Financial Instruments with Characteristics of
Compensation (formerly FAS123(R), Share-
Equity, Discussion Paper, IASB, June 2018.
Based Payment), FASB, December
2004,
12 IFRIC Update, March 2013.
para. 32, footnote 18a.
13 IFRIC Update, July 2014.
28 IASB Update, September 2011.
14 Accounting Standards Update 2014-12, FASB,
29 IFRIC Update, May 2013.
Accounting for Share-Based Payments When
30 IFRIC Update, September 2013.
the Terms of an Award Provide That a 31 IFRIC Update, September 2013.
Performance Target Could Be Achieved after
32 IASB Update, February 2014.
the Requisite Service Period (Topic 718).
33 IASB Update, April 2014.
15 IASB Update, November 2013.
34 D17 – IFRS 2 – Group and Treasury Share
16 IFRIC Update, July 2010 and September 2010.
Transactions, IASB, 2005, para. IE5.
17 ‘Contingent feature’ is not a defined term in
35 IFRIC Update, May 2013.
IFRS 2 but is used in the September 2011 IASB
36 IFRIC Update, November 2005.
Agenda Paper 7D (para. 49) to refer to a 37 Financial Reporting Guide 2 – Accounting for
condition not currently defined in IFRS 2.
Black Economic Empowerment (BEE)
18 IFRIC Update, November 2010 and March 2011.
Transactions, Accounting Practices Committee
19 IASB Update, September 2011.
(APC) of SAICA, December 2012.
20 IASB Update, May 2016.
38 Financial Reporting Guide 2 – Accounting for
21 FASB ASC 718 – Compensation – Stock
Black Economic Empowerment (BEE)
Compensation (formerly FAS123(R), Share-
Transactions, Accounting Practices Committee
Based Payment), FASB, December
2004,
(APC) of SAICA, December 2012.
[20-55-25].
22 IASB Update, September 2011 and IASB Agenda
Paper 7D September 2011 para. 57 et seq.
2761
Chapter 31
Employee benefits
1 INTRODUCTION .......................................................................................... 2765
2 OBJECTIVE AND SCOPE OF IAS 19 ............................................................ 2765
2.1
Objective .............................................................................................................. 2765
2.2 Scope
....................................................................................................................
2766
2.2.1
General scope requirements of IAS 19 .......................................... 2766
2.2.2
Employee benefits settled by a shareholder or another
group entity .......................................................................................... 2767
3 PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS – DEFINED
CONTRIBUTION AND DEFINED BENEFIT PLANS ....................................... 2767
3.1
The distinction between defined contribution plans and defined
benefit plans ......................................................................................................... 2767
3.2 Insured
benefits
..................................................................................................
2768
3.3 Multi-employer plans ........................................................................................ 2770
3.3.1
Multi-employer plans other than plans sharing risks
between entities under common control ...................................... 2770
3.3.1.A
The treatment of multi-employer plans .................... 2770
3.3.1.B
What to do when ‘sufficient information’
becomes available .......................................................... 2772
3.3.1.C
Withdrawal from or winding up of a multi-
employer scheme ........................................................... 2772
3.3.2
Defined benefit plans sharing risks between entities under
common control ................................................................................. 2772
3.4
State plans ............................................................................................................ 2774
3.5
Plans that would be defined contribution plans but for the
existence of a minimum return guarantee ..................................................... 2775
3.6 Death-in-service
benefits
.................................................................................
2776
4 DEFINED CONTRIBUTION PLANS .............................................................. 2779
4.1
Accounting requirements .................................................................................. 2779
2762 Chapter 31
4.1.1
General ................................................................................................. 2779
4.1.2
Defined contribution plans with vesting conditions ................... 2779
5 DEFINED BENEFIT PLANS – GENERAL ..................................................... 2780
6 DEFINED BENEFIT PLANS – PLAN ASSETS ................................................ 2781
6.1
Definition of plan assets .................................................................................... 2781
6.2
Measurement of plan assets ............................................................................. 2782
6.3 Qualifying
insurance
policies
..........................................................................
2783
6.4 Reimbursement
rights
.......................................................................................
2783
6.5
Contributions to defined benefit funds ......................................................... 2783
6.6 Longevity
swaps
.................................................................................................
2784
7 DEFINED BENEFIT PLANS – PLAN LIABILITIES ........................................ 2785
7.1
Legal and constructive obligations ..................................................................2785
7.2 Contributions
by
employees and third parties ............................................ 2786
7.3 Actuarial
methodology ..................................................................................... 2789
7.4
Attributing benefit to years of service ........................................................... 2790
7.5 Actuarial
assumptions ........................................................................................2793
7.6 Discount rate ....................................................................................
................... 2795
7.6.1
High quality corporate bonds ......................................................... 2796
7.6.2 No
deep
market ................................................................................. 2798
7.7
Frequency of valuations ................................................................................... 2799
8 DEFINED BENEFIT PLANS – TREATMENT OF THE PLAN SURPLUS
OR DEFICIT IN THE STATEMENT OF FINANCIAL POSITION .................... 2800
8.1
Net defined benefit liability (asset) ................................................................. 2800
8.2 Restriction
of
assets to their recoverable amounts ..................................... 2800
8.2.1
IFRIC Interpretation 14 – general requirements
concerning the limit on a defined benefit asset .......................... 2801
8.2.2
Economic benefits available as reduced future
contributions when there are no minimum funding
requirements for future service ...................................................... 2803
8.2.3
IFRIC Interpretation 14 – the effect of a minimum funding
requirement on the economic benefit available as a
reduction in future contributions ................................................... 2804
8.2.4
IFRIC Interpretation 14 – when a minimum funding
requirement may give rise to a liability ......................................... 2807
8.2.5
Pension funding payments contingent on future events
within the control of the entity ....................................................... 2809
9 DEFINED BENEFIT PLANS – PRESENTATION OF THE NET DEFINED
BENEFIT LIABILITY (ASSET) ....................................................................... 2810
Employee
benefits
2763
10 DEFINED BENEFIT PLANS – TREATMENT IN PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME ............................................................. 2811
10.1 Service cost .......................................................................................................... 2811
10.2 Changes in a defined benefit plan ................................................................... 2812
10.2.1
Past service cost .................................................................................. 2813
10.2.2 Settlements
..........................................................................................
2814
10.3 Net interest on the net defined benefit liability (asset) ............................... 2816
10.4 Remeasurements
................................................................................................. 2817
10.4.1
Actuarial gains and losses .................................................................. 2817
10.4.2 The return on plan assets, excluding amounts included in
net interest on the net defined benefit liability (asset) ................ 2817
11 DEFINED BENEFIT PLANS – COSTS OF ADMINISTERING EMPLOYEE
BENEFIT PLANS ........................................................................................... 2818
12 SHORT-TERM EMPLOYEE BENEFITS ......................................................... 2819
12.1 General recognition criteria for short-term employee benefits ............... 2819
12.2 Short-term paid absences ................................................................................. 2819
12.2.1
Accumulating absences .................................................................... 2820
12.2.2 Non-accumulating
paid absences .................................................. 2820
12.3 Profit-sharing and bonus plans ....................................................................... 2820
12.3.1
Present legal or constructive obligation ......................................... 2821
12.3.2
Reliable estimate of provision ........................................................ 2822
12.3.3
Statutory profit-sharing based on taxable profit. ........................ 2822
13 LONG-TERM EMPLOYEE BENEFITS OTHER THAN POST-
EMPLOYMENT BENEFITS ........................................................................... 2822
13.1 Meaning of other long-term employee benefits ......................................... 2822
13.2 Recognition
and
measurement
.......................................................................
2823
13.2.1
Attribution to years of service ........................................................ 2823
13.2.2
Long-term disability benefit ............................................................ 2823
13.2.3
Long-term benefits contingent on a future event ....................... 2824
14 TERMINATION BENEFITS ........................................................................... 2824
14.1 Statutory termination indemnities ................................................................. 2825
14.2 Recognition
.........................................................................................................
2826
14.3 Measurement
......................................................................................................
2826
15 DISCLOSURE REQUIREMENTS ................................................................... 2827
15.1 Defined contribution plans .............................................................................. 2827
15.2 Defined benefit plans ........................................................................................ 2828
15.2.1
Characteristics of defined benefit plans and risks
associated with them ........................................................................ 2829
15.2.2
Explanation of amounts in the financial statements ................... 2829
2764 Chapter 31
15.2.3
Amount, timing and uncertainty of future cash flows ................ 2833
15.2.4 Multi-employer plans ....................................................................... 2834
15.2.4.A
Plans accounted for as defined benefit plans .......... 2834
15.2.4.B Plans
accounted
for as defined contribution
plans ................................................................................. 2835
15.2.5
Defined benefit plans that share risks between entities
under common control ..................................................................... 2835
15.2.5.A
Plans accounted for as defined benefit plans .......... 2835
15.2.5.B
Plans accounted for as defined contribution
plans ................................................................................. 2835
15.2.6
Disclosure requirements in other IFRSs ....................................... 2837
15.3 Other employee benefits .................................................................................. 2838
16 POSSIBLE FUTURE DEVELOPMENTS .......................................................... 2838
16.1 IASB activities .....................
............................................................................... 2838
16.2 Interpretations Committee activities ............................................................. 2838
16.2.1
The availability of a refund from a defined benefit plan ........... 2838
List of examples
Example 31.1:
Defined benefit plan with employee contributions, where
the discount rate is higher than the salary growth rate ............. 2788
Example 31.2:
The projected unit credit method .................................................. 2789
Example 31.3:
Attributing benefits to years of service .......................................... 2791
Example 31.4:
Deficit-clearing future minimum funding requirements
when refunds are not available ....................................................... 2805
Example 31.5:
Effect of a prepayment when a minimum funding
requirement exceeds the expected future service charge ........ 2807
Example 31.6:
Effect of the minimum funding requirement when there is
an IAS 19 surplus and the minimum funding contributions
payable are fully refundable to the entity..................................... 2808
Example 31.7:
Effect of a minimum funding requirement when there is
an IAS 19 deficit and the minimum funding contributions
payable would not be fully available ............................................. 2808
Example 31.8:
Accumulating paid absences ........................................................... 2820
Example 31.9:
Profit sharing and bonus plans ......................................................... 2821
Example 31.10:
Termination benefits ........................................................................ 2827
2765
Chapter 31
Employee benefits
1 INTRODUCTION
This Chapter deals with IAS 19 – Employee Benefits – as published in June 2011 and
amended in February 2018. [IAS 19.172]. Predecessors of this standard are discussed in
earlier editions of International GAAP. The amendments published in February 2018
address the accounting for a defined benefit plan when a plan amendment, curtailment or
settlement occurs during the reporting period. They require entities to use the updated
actuarial assumptions to determine current service cost and net interest for the remainder
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 551