1.4 Employee Benefits

International Accounting Standard 19, provides guidelines for accounting and reporting of employee benefits. Employee benefits are defined as all forms of consideration given by an entity in exchange for services rendered by employees or for their termination benefits.

The standard categorizes employee benefits into four main types:

1. Short-term employee benefits: These are benefits, such as wages, salaries, bonuses, paid annual leave, and non-monetary benefits like medical care, provided within 12 months after the end of the reporting period. They are recognized as an expense in the profit and loss statement for the period in which the employees have rendered the related service.
2. Post-employment benefits: These benefits are provided to employees after their employment period ends and can be classified into two categories: a. Defined contribution plans: These are retirement benefit plans where the employer contributes a fixed or determinable amount into a separate fund, and the employee bears the investment and longevity risks. b. Defined benefit plans: These are retirement benefit plans where the employer promises to provide a specified retirement benefit to employees, typically based on factors like salary, years of service, and age. The employer is responsible for funding and managing the investment and longevity risks.
3. Other long-term employee benefits: This category includes benefits, such as long-term disability benefits, long-service leave, sabbatical leave, jubilee or loyalty benefits, and other similar benefits that are payable more than 12 months after the end of the reporting period. These benefits are typically recognized on an accrual basis, taking into account actuarial valuations and other relevant factors.
4. Termination benefits: Termination benefits are provided when an entity terminates the employment of an employee before the normal retirement date or as part of a voluntary redundancy program. Examples include severance payments, early retirement benefits, and redundancy payments. These benefits are recognized as an expense when the entity can no longer withdraw the offer of those benefits.

IAS 19 requires entities to measure and disclose information about employee benefits, including their recognition, measurement, presentation, and disclosure in the financial statements. It also provides guidance on actuarial assumptions, discount rates, and other relevant factors used in measuring employee benefits.