FINANCIAL ACCOUNTING

Financial Accounting

Financial Accounting

Question

Critically discuss the extent to which the requirements of IAS 19 Employee Benefits have led to a situation where all companies presenting financial statements in compliance with IFRS provide information that is useful to a wide range of users in making economic decisions.

The target of IAS 19 (Revised 1998) is to prescribe the accounting and revelation for employee benefits (that is, all types of concern granted by an enterprise in exchange for service rendered by employees). The standard inherent all of the comprehensive obligations of the Standard is that the cost of supplying employee benefits should be identified in the time span in which the benefit is acquired by the employee, other than when it is paid or payable.

IAS 19 concerns to (among other types of employee benefits):

wages and wages

compensated nonattendances (paid holiday and ill leave)

profit distributing designs

bonuses

medical and life protection benefits throughout employment

housing benefits

free or subsidised items or services granted to employees

pension benefits

post-employment health and life protection benefits

long-service or sabbatical leve

'jubilee' benefits

deferred reimbursement programmes

termination benefits

equity reimbursement benefits (disclosure only).

Basic Principle of IAS 19

The cost of supplying employee benefits should be identified in the time span in which the benefit is acquired by the employee, other than when it is paid or payable.

For short-term employee benefits (those payable inside 12 months after service is rendered, for example salaries, paid holiday and ill depart, bonuses, and nonmonetary benefits for example health care and housing), the undiscounted allowance of the benefits anticipated to be paid in esteem of service rendered by employees in a time span should be identified in that period. [IAS 19.10] The anticipated cost of short-term reimbursed nonattendances should be identified as the employees render service that rises their a claim or, in the case of non-accumulating nonattendances, when the nonattendances occur. [IAS 19.11]

The enterprise should identify the anticipated cost of profit-sharing and bonus payments when, and only when, it has a lawful or constructive responsibility to make such payments as a outcome of past happenings and a dependable approximate of the anticipated cost can be made. [IAS 19.17]

The accounting remedy for a post-employment benefit design will be very resolute according to if the design is a characterised assistance or a characterised benefit plan:

· Under a characterised assistance design, the enterprise buys repaired assistance into a finance but has no lawful or constructive responsibility to make farther payments if the finance does not have adequate assets to yield all of the employees' entitlements to post-employment benefits.

· A characterised benefit design is a post-employment benefit design other than a characterised assistance plan. These would encompass both prescribed designs and those casual practices that conceive a constructive responsibility to the enterprise's employees.

Companies around the world are facing one of the biggest-ever change in financial reporting. In Europe, from 2005 there is the requirement to publish consolidated financial statements prepared in accordance with international standards, ...