5 - Employee Benefits Pt. 1 Flashcards
PAS for employee benefits
PAS 19
PAS for Accounting & Reporting by Retirement Benefit Plans
PAS 26
All forms of consideration given by entity in exchange for service rendered by employees or for termination of employment
Employee benefits
Include regular, part-time or casual, etc.
Employees
Employee benefits are recognized as ___ when employees have rendered service except if employee benefits form part of the cost of another asset.
expense
Employee benefits already earned but not yet paid are recognized as ___
liabilities
Employee benefits may arise from: (3)
- Contractual agreements
- Legislation
- Informal practices that create constructive obligations
4 Categories of Employee Benefits under PAS 19
a. Short-term
b. Post-employment
c. Other long-term
d. Termination
Due to be settled within 12 months after end of the period where employees have rendered the related services.
Short-term employee benefits
Fixed amount
Salaries
Per hour; not fixed
Wages
If there is excess payment in the benefits, it is recognized as ___
Prepaid asset
Short-term employee benefits are recognized ___
periodically
Include vacation, holiday, maternity, paternity, and sick leaves.
Short-term absences
Entitlement to paid absences may be either:
a. Accumulating
1. Vesting
2. Non-vesting
b. Non-accumulating
Can be carried forward and used in future periods if not used in current period.
Accumulating
Unused entitlement paid in cash when employee leaves the entity (monetized)
Vesting
Unused entitlement are not monetized
Non-vesting
Expire if not used in current period and are not paid in cash when employee leaves the entity
Non-accumulating
All unused entitlements are accrued & measured @ their expected settlement amount
Accumulating & vesting
Unused entitlements are accrued but taking into account the possibility that employees may leave before they use those entitlements.
Accumulating & non-vesting
Unused entitlements are not accrued but recognized only
Non-accumulating
Additional incentives given to employees - to motivate the employees to be more productive
Profit-sharing and bonus plans
Profit sharing and bonuses are recognized when: (2)
- Entity has a present obligation to pay for them
- Cost can be measured reliably
Examples of bonus schemes:
- Before before
- After before
- Before after
- After after
Employee benefits that are payable after the completion of employment (except termination & short-term employee benefits)
Post-employment benefits
Can be formal or informal
Post-employment benefit plan
Post-employment benefit plan can be:
a. Contributory or Non-contributory
b. Funded or Unfunded
Post-employment benefits plan is formal if
explicitly stated in employment contract
Post-employment benefits plan is informal if
not documented but implied
Both employer & employee contribute to the retirement fund of employee
Contributory
Only the employer contributes to the retirement fund of employee
Non-contributory
Retirement fund is isolated from employer’s control and is transferred to a trustee to manage fund and pay directly the retiring employees
Funded
Employer manages any established fund and pays directly the retiring employees
Unfunded
Employer commits to make fixed contributions that will be used to pay for the retirement benefits of the employees; risk rests with employee
Defined contribution plans
Employer commits to pay a definite amount of retirement benefits; risk rests with employer
Defined benefit plans
Retirement benefits plans that have characteristics of both defined contribution plan and defined benefit plan; considered defined benefit plans
Hybrid plans
Various unrelated employers contribute to a common fund manage by a trustee to provide post-employment benefits to employees of participating employers; classified as either defined contribution plans or defined benefit plans
Multi-employer plans
Established by law and operated by the government. It is mandatory for all entities not subject to control/influence by entity; classified as either defined contribution plans or defined benefit plans
State plansa
Covers government employees
Government Service Insurance System (GSIS)
Covers private sector
Social Security System (SSS)
Types of Retirement Benefits:
- Lifetime monthly pension
- Lump sum account
Retiree who has paid at least 120 monthly contributions prior to retirement
Lifetime monthly pension
Retiree who has not paid the required 120 monthly contributions
Lump sum amount
A retiree has the option to receive in advance the first ___ monthly pension in lump sum.
18
Based on the contributions paid, credited years of service and number of dependent minor children not to exceed five.
Monthly pension
Equal to the total contributions paid by the member and by the employer including interest
Lump sum
Upon death of retiree, primary beneficiaries are entitled to ___ of the monthly pension & dependents to the ‘dependents’ pension.
100%
Compulsory retirement age
60-65 years
Retirement Pay Law
R.A. 7641
R.A. 7641
Retirement Pay Law
Employer may pay insurance premiums to fund a post-employment benefit plan; either defined contribution plan or defined benefit plan.
Insured Benefits
Accounting for defined contribution plan recognizes contribution as ___ and ___ when employees have rendered service.
expense; liability
If defined contribution plan is due within 12 months, it is measured ___
@ an undiscounted amount
If defined contribution plan is due beyond 12 months it is
discounted
Assumes obligation of paying the retiring employee
Trustee
According to PAS 19, in the absence of a retirement plan, entities are subject to the ___
minimum requirement of the law
