AS-15( REVISED 2005) EMPLOYEE’S BENEFITS

PRESENTED By :-

Dr. RAJ. K. AGARWAL FCA,FCS,AICWA,LLB, Phd.

RAKESH RAJ & ASSOCIATES

AS-15(Revised 2005 – Employee’s Benefit)

BASIC PRINCIPLE -Recognize the expenses of benefit to employees during their service Period, which may be paid.

Currently,On Retirement, orPost Retirement

AS-15 (REVISED 2005- EMPLOYEE’S BENEFITS)

• APPLICABILITY With effect from accounting period commencing on or after 1.04.2006 Level I Enterprises -in entirety Other than level I Enterprises - para 11 to 16, 46 having 50 or more employees and 139 not applicable

para 50 to 116 limited applicability

less than 50 employees - do – instead of actuarial

valuation, some other method may be used.

AS-15(Revised 2005-Employees Benefits)

• SCOPE-It Covers all employee Benefits as per –

Formal agreement Legislative requirement Informal practice

-It does not cover Profit Sharing Plans & Employee benefit Plans e.g., ESOP

AS 15(Revised 2005- Employee’s Benefit)

• NATURE OF BENEFITS -Short term employees Benefits: (payable within 12 months after providing Services)

- Wages, Salaries- Leave Compensation- Bonus- Non Monetary Benefits

-Post Employment Benefits : - Gratuity

- Pension/Superannuation - Provident Fund - Medical Facilities

AS 15(Revised 2005- Employee’s Benefit)

- Other long term Employee Benefits: ( Payable after 12 months of providing service)

- Long Service Leaves - Bonuses

- Deferred Compensation

- Termination Benefits : Compensations and other benefits

on termination or pre mature retirement.

AS 15(Revised 2005- Employee’s Benefit)

Short Term Employee Benefits• Salaries, wages and other non-monetary Benefits: - To Account for in Current Period

- Not To Discount

• Leaves : Fully Encashable - Full Provision Lapsing - No Provision Accumulating - Provision for Expected Liabilities

• Bonus : May be contingent upon future service To provide for expected liability.

AS 15(Revised 2005- Employee’s Benefit)

Post Employment Benefits

• Defined Contribution Plans

• Defined Benefit Plans

AS 15(Revised 2005- Employee’s Benefit)

• Defined Contribution Plans

- Liability of Enterprise : Periodic Contribution e.g. Provident Fund.

- On Retirement Employee gets : Accumulated Contribution and Appreciation of Fund.

AS 15(Revised 2005- Employee’s Benefit)

• Defined Benefit Plans – • Benefit on Retirement or Post Retirement - Expense to be provided during service period of the employee.

Liability for Expense: Unfunded Funded - State Fund

- Trust Fund - Insurance Fund - Mutual Fund

( To Create Plan Asset)

AS 15(Revised 2005- Employee’s Benefit)

Group Gratuity Scheme of Insurers

• Whether Defined Contribution Plan ?

• Whether it provides insurance cover? Or• It is only a plan Asset ?

AS 15(Revised 2005- Employee’s Benefit)

• Non Vesting Benefits also to be provided : e.g. Gratuity payable after completion of five year of service but to be provided from Ist Year

AS 15(Revised 2005- Employee’s Benefit)Defined Benefit Plans • Estimation of liability of Benefits

: Using Actuarial assumptions

• Discounting to Determine present Value (A): Using Projected Unit credit

Method.• Determine Fair Value of Plan Assets (B)

Difference of A-B to be carried in Balance Sheet as Defined Benefit Liability.

AS 15(Revised 2005- Employee’s Benefit)• Defined Benefit Plans Expenses to be provided in P&l Account to

Constitute : - Current Service Cost - Interest Cost - Expected Return on plan asset - Actuarial gain or losses - Past Service Cost - Effect of any curtailment or settlement

AS 15(Revised 2005- Employee’s Benefit)

Actuarial Assumptions

• Demographic - Mortality - Employee Turnover

• Financial - Future Salary increase - Discount rate

- Return on plan asset- Medical Treatment Cost- Change in cost of Medical Services

Discount rate to be as per return on Government Bonds

AS 15(Revised 2005- Employee’s Benefit) Special Features of Revised AS-15

• Disclosure of Different Components of cost to be charged to P& L Account.

• Disclosure and break up of actuarial assumptions.• Discounting Rates as per yield on Government Bonds.• Actuarial Assumptions may be reviewed by

Management/ Auditors.• Benefit Obligations and plan asset to be separately

disclosed.• Management of plan assets is separately reflected.

AS 15(Revised 2005- Employee’s Benefit)Disclosures

• Nature of Defined Benefit plans and effect of changes if any.

• Break up and reconciliation of different components of defined benefit obligation.

• Break up and reconciliation of different components or plan assets and return on assets.

• Expenses recognized in P& L Account in different components.

• Main Actuarial assumptions used.

AS 15(Revised 2005- Employee’s Benefit)

• Termination Benefits:

- To be Accounted for expenses immediately.

- VRS is a termination benefit.

- In case of VRS transitional provisions.

AS 15(Revised 2005- Employee’s Benefit)

• Transitional provisions: - Liability to be recognized as per revised AS-15 as on 01-04-2006, to be adjusted against revenue reserves.

- Liability as per pre-revised AS- 15 shall be prior period expense.

- VRS up to 31-03-2010 : After that in the year of incurrence.

T H A N K Y O U