Employee Benefits Accounting Standard 15 (R)
Accounting Standard (AS) 15, Employee Benefits (revised 2005) – referred to as AS 15 (R) issued by the Council of the Institute of Chartered Accountants of India, has comeinto effect in respect of accounting periods commencing on or after April 1, 2006
The Central Government of India, on 07-12-2006, issued the Companies (Accounting Standard) Rules, 2006.
As per the notified rules, AS 15, (revised) is applicable for all accounting periods commencing on or after 07-12-2006. Thus, for Companies, whose accounting year ends on 31-12-07 or 31-03-08, will have to comply with the revised AS 15.
Actuarial valuations under the AS 15 (R) scheme are defined under the Actuarial Practice Standards or Guidance Notes provided by the Institute of Actuaries of India, and all reports issued under the standards are compliant with the guidance notes.
The AS-15 standards areapplicable toenterprises where the number of persons employed is 50 or more.
For Enterprises employing less than 50 persons, any method of accrual for accounting long-term employee benefits liability is allowed.
Under the AS 15 (R) it is the responsibility of the reporting enterprise to measure their obligations under the benefit plans defined by the standards.
Under the As-15 standards, the benefits are divided into 4 parts, for ease of application:
Short term benefits
Gratuity Schemes and Post-Employment benefits
Other Long term benefits
Termination benefits includes all compensations that are provided by the employer after the voluntary retirement age.
Short-term benefits can include periodic compensations, such as salary, leaves – which may or may not be carried over, and allowances. These are recognized and factored into the overall compensation plan.
Post employment benefits include benefits payable after the completion of the period of employment, but are different from termination benefits. Certain amount of gratuity payable depending on the number of years the employee has worked for the firm are computed into this category. The gratuity may also be either funded or non-funded.
The change in the employersobligation at the beginning and the end of the period is recognized in the profit and loss A/c in the AS 15 report.
For more information, please see our sample As-15 report.
The guideline notes provide that an employer must make specific disclosures, in consultation with an actuary and their auditors; and ensure that the reporting meet the constraints of the enterprise’s financial reporting timelines.
The actuary will provide advice on these matters below, and factor them into the reports prepared under this standard:
Actuarial Gains and Losses
Past Service Costs
1. Institute of Actuaries of India – Guidance Notes:Click Here
2. Actuarial Practice Standard (APS) 26 Guidance Notes:Click Here
3. Ministry of Corporate Affairs Notification on Employee Benefits:Click Here