IAS19 | KPMG | BE

IAS19 : short-term, long-term & post employment benefits

IAS19

Curious about what the IAS19 means for you and your employee benefits plan? The new IAS-IFRS 19 covers all kinds of employee benefits, including but not limited to pensions.

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IAS19 : short-term, long-term & post employment benefits

The IAS19 looks at all forms of consideration given by an enterprise in exchange for service rendered by the employee. It outlines the accounting requirements for employee benefits, including short-term, various long-term, post-employee benefits and termination benefits. Employee benefits refer to all forms of consideration provided by an organization in exchange for services rendered by the employee. The Defined Contribution (DC) plan also falls in the scope of IAS19 / ASC715 and is evaluated using the Projected Unit Credit or (PUC).

The general principle of IAS19 is to recognize the employee benefit expense in the same period during which the benefit is earned by the employee. This enhances comparison of the account for different companies and thus facilitates overall consolidation. It includes all forms of benefits provided by a company in exchange for services rendered by their employees (constructive obligation).

To account for these benefits, and determine the pension liabilities we look to the PUC method. It includes:

  1. An estimation of the ultimate cost for the entity of the benefit that employees have earned in return for their service in current and prior periods as close to reality as possible. For this, we use actuarial assumptions about demographic and financial variables that affect the cost of the benefit.
  2. A Subtraction of that benefit from the total to determine the present value of the defined benefit obligation.

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