IAS 19 Employee Benefits

IAS 19 prescribes the accounting for all types of employee benefits except share-based payment, to which IFRS 2 applies. Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment. IAS 19 requires an entity to recognise:

• a liability when an employee has provided service in exchange for employee benefits to be paid in the future; and
• an expense when the entity consumes the economic benefit arising from the service provided by an employee in exchange for employee benefits.

Short-term employee benefits (to be settled within 12 months, other than termination benefits)

These are recognised when the employee has rendered the service and are measured at the undiscounted amount of benefits expected to be paid in exchange for that service.

Post-employment benefits (other than termination benefits and short-term employee benefits) that are payable after the completion of employment

Plans providing these benefits 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:

• A defined contribution plan is a post-employment benefit plan 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 IAS 19, when an employee has rendered service to an entity during a period, the entity recognises the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense) and as an expense, unless another Standard requires or permits the inclusion of the contribution in the cost of an asset.
• A defined benefit plan is any post-employment benefit plan other than a defined contribution plan.  Under IAS 19, an entity uses an actuarial technique (the projected unit credit method) to estimate the ultimate cost to the entity of the benefits that employees have earned in return for their service in the current and prior periods; discounts that benefit in order to determine the present value of the defined benefit obligation and the current service cost; deducts the fair value of any plan assets from the present value of the defined benefit obligation; determines the amount of the deficit or surplus; and determines the amount to be recognised in profit and loss and other comprehensive income in the current period. Those measurements are updated each period.

Other long-term benefits

These are all employee benefits other than short-term employee benefits, post-employment benefits and termination benefits. Measurement is similar to defined benefit plans.

Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment. An entity recognises a liability and expense for termination benefits at the earlier of the following dates:

• when the entity can no longer withdraw the offer of those benefits; and
• when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits.

In April 2001 the International Accounting Standards Board (Board) adopted IAS 19 Employee Benefits, which had originally been issued by the International Accounting Standards Committee in February 1998. IAS 19 Employee Benefits replaced IAS 19 Accounting for Retirement Benefits in the Financial Statements of Employers (issued in January 1983). IAS 19 was further amended in 1993 and renamed as IAS 19 Retirement Benefit Costs.

The Board amended the accounting for multi‑employer plans and group plans in December 2004. In June 2011 the Board revised IAS 19; this included eliminating an option that allowed an entity to defer the recognition of changes in net defined benefit liability and amending some of the disclosure requirements for defined benefit plans and multi‑employer plans.

In November 2013 IAS 19 was amended by Defined Benefit Plans: Employee Contributions (Amendments to IAS 19). The amendments simplified the requirements for contributions from employees or third parties to a defined benefit plan, when those contributions are applied to a simple contributory plan that is linked to service.

Other Standards have made minor consequential amendments to IAS 19, including Annual Improvements to IFRSs 2012–2014 Cycle (issued September 2014), Annual Improvements to IFRS Standards 2014–2016 Cycle (issued December 2016), IFRS 17 Insurance Contracts (issued May 2017), Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) (issued February 2018) and Amendments to References to the Conceptual Framework in IFRS Standards (issued March 2018).