AS 15R and IND AS 19 4 minutes read

Exploring The Key Differences Between AS 15R And Ind AS 19 In Employee Benefit Accounting

Posted By abdul January 12, 2024
Ind AS 19

Section 129 of the Companies Act 2013 requires companies to prepare Financial Statements each year. The objective of the Indian Accounting Standards IND AS 19 is to enhance transparency in financial transactions, aligning with accounting standards. It aims to establish consistency between accounting standards for Indian companies and international ones. This article will shed light on some key changes brought about by Ind AS 19 when compared with AS – 15(R).

Here we will explore the key differences and terms and conditions in accounting for employee benefit plans. Employee benefit accounting typically includes gratuity, leave encashment, pension, post-retirement medical benefits, and more provided by the company. Employee benefits accounting should adhere to the formats specified in AS 15 (Revised 2005) and Ind AS 19.

Termination Benefits 

According to Ind AS 19, additional guidance is provided to recognize the termination benefits. Whereas AS 15R specifies that termination benefits should be discounted if they fall outside a year from the end of the reporting period. Ind AS 19 states that termination benefits should be accounted for if there is an enhancement to post-employment benefit plans. If it is settled within a year, the requirements of short-term employee benefits can be availed. And if it takes more than a year, the requirements of long-term benefits should be applied. 

A Change in Profit & Loss Account

AS 15(R) specifies that all the actuarial profit or losses should flow through the Profit & loss account. But under Ind AS 19, there is an introduction of Other Comprehensive Income elements. The employee benefit plans such as gratuity, earned leave & pensions, actuarial gains and losses should fall under the OCI table. It should not impact the profit and loss account. The new concept of OCI never existed in AS-15(R). 

The actuarial gains & losses are accounted for separately, thus ensuring minimal volatility. Whereas when other long-term employment benefits are calculated, actuarial gains and losses should continue to flow through the profit and loss statements, as stated in IND AS 19.

Net Interest On The Benefit Liability

Ind AS 19 states that there should be a disclosure of the net interest on the benefit liability. The net interest should include interest income on plan assets. Along with the interest cost of the obligation-defined benefits. But AS 15(R) implies that the expected return should be formulated using a separate assumption. It is however linked to the discount rate now.

Some More Assumptions

It is mandatory to use financial assumptions like the discount rate as per IND AS 19. There should be a return on plan assets which should be according to the reference to market yields. This should be calculated at the end of the reporting period on government bonds.

Professional Guidance

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Conclusion

AS 15R and IND AS 19 are important standards of accounting techniques that will bring forth crucial changes in employee benefits. The financial statements that show the balance sheets, income statements, and disclosures should be transparent and accurate. Every organization must adapt to these changes by understanding the standards and utilizing expert guidance. If you lack the expertise to handle these complexities, you can get in touch with professional consultancy services. Professional consulting firms have expertise in accounting standards that can guarantee accurate reporting for your organization.

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