LKAS 19 – EMPLOYEE BENEFITSGroup No 05

WHAT’S MEAN BY SRI LANKA ACCOUNTING STANDARDS

LECTURE CONDUCT BY – W.M.T.P.B. WIJEKOON

WHAT’S MEAN BY SRI LANKA ACCOUNTING STANDARDS

• Accounting standards (LKAS) set by Institute of Chartered Accountants of Sri Lanka

• This Sri Lanka accounting standards sets out the concepts that underlie the preparation and presentation of financial statements for external users.

• Sri Lanka Accounting Standards comprise Accounting Standards prefixed both SLFRS and LKAS

• SLFRS refers to Sri Lanka Accounting Standards corresponding to IFRS and LKAS are Sri Lanka

WHAT’S MEAN BY SRI LANKA ACCOUNTING STANDARDS

Accounting standards tend to more things, for example, To decide when to buy, hold or sell an equity investment. To assess the stewardship or accountability of management. To assess the ability of the entity to pay and provide other benefits to

its employees. To assess the security for amounts lent to the entity. To determine taxation policies. To determine distributable profits and dividends.Etc.

INTRODUCTION TO SRI LANKA ACCOUNTING

STANDARDS 19

LECTURE CONDUCT BY - A. MENDHION AND R. KOKULARASU

SRI LANKA ACCOUNTING STANDARD LKAS 19 EMPLOYEE BENEFITS

• BASIC PRINCIPLE OF LKAS 19 - The cost of providing employee benefits should be recognized in the period in which the benefit is earned by the employee, rather than when it is paid or payable.

• The objective of this Standard is to prescribe the accounting and disclosure for employee benefits. The Standard requires an entity to recognize:

• (a) A liability when an employee has provided service in exchange for employee benefits to be paid in the future

• (b) An expense when the entity consumes the economic benefit arising from service provided by an employee in exchange for employee benefits.

OBJECTIVE OF LKAS 19• The objective of this Standard is to prescribe the accounting

and disclosure for employee benefits. The Standard requires an entity to recognize:

• (a) A liability when an employee has provided service in exchange for employee benefits to be paid in the future

• (b) An expense when the entity consumes the economic benefit arising from service provided by an employee in exchange for employee benefits.

SCOPE OF LKAS 19• This Standard shall be applied by an employer in accounting for all employee

benefits, except those to which SLFRS 2 Share-based Payment applies.

• This Standard does not deal with reporting by employee benefit plans (see LKAS 26 Accounting and Reporting by Retirement Benefit Plans).

• The employee benefits to which this Standard applies include those provided.

BASIC PRINCIPLE OF LKAS 19 The cost of providing employee benefits should be recognized in the period in which the benefit is earned by the employee, rather than when it is paid or payable.

CATEGORIES OF EMPLOYEE BENEFITS TO BE COVERED

Short term employee benefits Postemployment benefits Post-employment benefits. Other long term employee benefits. Termination benefits.

LKAS 19 APPLIES TO • 1. Wages and Salaries • 2. Compensated Absences (paid vacation and sick leave) • 3. Profit Sharing Plans • 4. Bonuses • 5. Medical and Life Insurance Benefits during employment • 6. Housing Benefit • 7. Free or Subsidized goods or services given to employees • 8. Pension Benefits • 9. Postemployment Medical and Life Insurance Benefits • 10. Long-Service or Sabbatical Leave • 11. ‘Jubilee’ Benefits • 12. Deferred Compensation Programmers • 13. Termination Benefits.

SHORT TERM EMPLOYEE BENEFITS

LECTURE CONDUCT BY - TUSHYANTHAN

SHORT-TERM EMPLOYEE BENEFITS

• Short term employee benefits being benefits that become due within 12 months after the end of the period in which the employees render the related service.

• It includes items such as wages, salaries and social security contributions, paid annual leave, paid sick leave, profit sharing and bonuses (if payable within twelve months of the end of the period)

• And non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees

POST-EMPLOYMENT BENEFITS

LECTURE CONDUCT BY D.M.S. NALAKA

POST-EMPLOYMENT BENEFITS (DEFINED CONTRIBUTION AND DEFINED BENEFIT)

• Ex - pensions, other retirement benefits, postemployment life insurance and post-employment medical care.

• Post-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.

• Postemployment benefit plans are classified as either defined contribution plans or defined benefit plans, depending on the economic substance of the plan as derived from its principal terms and conditions.

POST-EMPLOYMENT BENEFITS DEFINED CONTRIBUTION PLANS

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Under defined contribution plans the entity’s legal or constructive obligation is limited to the amount that it agrees to contribute to the fund.

POST-EMPLOYMENT BENEFITS: DEFINED

BENEFIT PLANS • Defined benefit plans are post-employment benefit

plans other than defined contribution plans. • Under defined benefit plans: • (a) The entity’s obligation is to provide the agreed

benefits to current and former employees • (b) Actuarial risk (that benefits will cost more than

expected) and investment risk fall, in substance, on the entity. If actuarial or investment experience are worse than expected, the entity’s obligation may be increased.

ACCOUNTING BY AN ENTITY FOR DEFINED BENEFIT PLANS INVOLVES THE FOLLOWING

STEPS • (a) determining the deficit or surplus. • (b) determining the amount of and the net defined

benefit liability (asset) as the amount of the deficit or surplus determine

• (c) determining amounts to be recognised in profit and loss:

• (d) determining the remeasurements of the net defined benefit liability (asset), to be recognised in other comprehensive income, comprising:

OTHER LONG-TERM EMPLOYEE BENEFITS

LECTURE CONDUCT BY - K.NIROJAN

LONG-TERM EMPLOYEE BENEFITS

• Other long-term employee benefits including long service leave or sabbatical leave, jubilee or other long-service benefits, long term disability benefits, and if they are not payable wholly within 12 months after the end of the period, profit sharing, bonuses and deferred compensation.

TERMINATION EMPLOYEE BENEFITS

LECTURE CONDUCT BY – A.M.P.R.KUMARA

TERMINATION BENEFITSTermination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either:

(a) An entity’s decision to terminate an employee’s employment before the normal retirement date; or

(b) An employee’s decision to accept an offer of benefits in exchange for the termination of employment.

TERMINATION BENEFITS

An entity shall recognize a liability and expense for termination benefits at the earlier of the following dates: (a) When the entity can no longer withdraw the offer of those benefits; and (b) When the entity recognizes costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits.

THE STANDARD DOES NOT APPLY TO

•This standard does not apply to benefits which needs to cover under the IFRS2 share-based payment •This Standard does not deal with reporting by employee benefit plans (covered under LKAS 26) e.g. accounting and reporting by trust plans

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