Lkas 19 employee benefits

Employee Benefits

1LKAS - 19 (Employee Benefits)

LKAS 19

2LKAS - 12 (Income Taxes)

Objective

To Prescribe the accounting and disclosure for employee benefits.

ScopeThe standard shall be applied by an employer in

accounting for all employee benefits, except those to which SLFRS 2 Share Based Payment applies.

Objective and Scope


Types of employee benefits

Short term employee benefits

Post employment benefits

Termination benefits

Other long term employee benefits



Short term employee benefits

Short term employee benefits, which are employee benefits ( Other than termination benefits) that are wholly due within twelve months after the end of the period in which employees render related services.

E.g. - Wages , salariesPaid annual leave and paid sick leaveProfit sharing and bonuses (If payable within 12 months of the

end of the period)Non monetary benefits (Medical care, housing, car etc…)



Post employment benefits

Post employment benefits are employee benefits (other than termination benefits) which are payable after the completion of employment.

E.g. – PensionsOther retirement benefitsPost employment life insurancePost employment medical care



Termination benefits

Termination benefits are employee benefits payable 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 voluntary redundancy in exchange for those benefits.



Other long term employee benefits

Which are employee benefits (other than post employment benefits and termination benefits) that are not wholly due within twelve months after the end of the period in which employees render related services.E.g. -

Long service leave or sabbatical leaveLong term disability benefits If not wholly due within twelve months after the end of the

period• Profit sharing• Bonuses• Deferred compensations

LKAS - 19 (Employee Benefits) 8

Retirement Benefit Obligation

LKAS 19 Sri Lanka Accounting standard for SMEs

Applicability

Public companiesPrivate companies

For SBEs OthersActuarial valuation

Formula method Simplified method

Whether entity is able to use Projected Unit Credit Method to measure its define benefit obligation without undue cost or effort?

Yes No

Use Projected Unit Credit method

Follow a simplified method


What is a S.B.E?Specified Business Enterprises (SBEs)The following have been defined as specified business enterprises by the Act and the regulations made under the Act:

Companies licensed under the Banking Act, No. 30 of 1988.Companies authorized under the Control of Insurance Act, No. 25 of 1962, to carry on insurance business.Companies carrying on leasing business.Factoring companies.Companies registered under the Finance Companies Act, No.78 of 1988.Companies licensed under the Securities and Exchange Commission Act, No. 36 of 1987, to Operate unit trust.Fund Management Companies. Companies licensed under the Securities and Exchange Commission Act, No. 36 of 1987, to carry on business as stockbrokers or stock dealers.Companies licensed under the Securities and Exchange Commission Act, No. 36 of 1987, to operate a Stock Exchange.Companies listed in a Stock Exchange licensed under the Securities and Exchange Commission Act, No. 36 of 1987.


What is a S.B.E?Specified Business Enterprises (SBEs)

Other Companies

Which have a turnover in excess of Rupees 500 million;

Which at the end of the previous financial year, had shareholders equity in excess of Rupees 100 Million;

Which at the end of the previous financial year, had gross assets in excess of Rupees 300 Million;

Which at the end of the previous year had liabilities to banks and other financial institutions in excess of Rupees 100 Million;

Which have a staff in excess of 1000 employees;


What is a simplified method?

Ignore estimated future salary increases.

Ignore future service of current employees.

Ignore possible in-service mortality of current employees between the reporting date and the date employees are expected to begin receiving post-employment benefit.


Calculating gratuity liability – Simplified method

Last month salary No of years worked2

XGratuity provision at the end of the period

=

As per Payment of Gratuity act No. 12 of 1983


What is last month salary?Salary sheet for the month of March 2016

Basic salary 20,000Meal allowance 5,000Traveling allowance 6,000Attendance allowance 4,000No pay (1,000)Loan deduction (3,000)Other deductions (5,000)EPF (2,320)Staff welfare fund (100)Net salary 23,580

NoteTraveling allowance is not considering when calculating EPF.

What is the amount using as last month salary for calculating Gratuity as at 31st March 2016?


What is last month salary?Salary sheet for the month of March 2016

Basic salary 20,000Meal allowance 5,000Traveling allowance 6,000Attendance allowance 4,000No pay (1,000)Loan deduction (3,000)Other deductions (5,000)EPF (2,320)Staff welfare fund (100)Net salary 23,580

NoteTraveling allowance is not considering when calculating EPF.

What is the amount using as last month salary for calculating Gratuity as at 31st March 2016?

Rs. 29,000/-


What is last month salary?

Last month salary 50,000Date of recruitment 10th September 2005Date of resigned 14th March 2016

Required

Calculate gratuity payment.


What is last month salary?

Last month salary No of years worked2

XGratuity provision at the end of the period

=

50,000

2X= 11 years

= Rs. 275,000/=


What is No of completed years?

“A year shall mean a completed period of 12 consecutive months during which a workman has worked not less than 180 days”.

As per Payment of Gratuity act No. 12 of 1983

Education

Lkas 19 employee benefits