Section 1: Introduction
The Ministry of Corporate Affairs (MCA) issued a notification on 16 February 2015 announcing a roadmap for the implementation of IND AS. The roadmap provides a phase-wise approach, primarily based on a company’s net worth. Effective 1 April 2016, the adoption of IND AS will be mandatory for companies with a net worth exceeding INR 500 crores.
IND AS 19 relates to the accounting of employee benefits for the company’s financial statements.
Ind AS 19 shall replace AS15 R over the coming years. This standard is applicable to value employee benefits e.g. gratuity, paid annual leave, retirement benefits (pension, etc), and medical care.
Section 2: Key Changes from AS15 R to Ind AS 19
The following are the key changes:
1. Treatment of Actuarial Gains and losses:
Actuarial Gains and losses arise due to changes in the experience and assumptions than what was assumed at the beginning of the period.
Under AS 15 R, Actuarial gains and losses are recognized immediately in Profit and Loss Account. In Ind AS 19, these are to be recognized immediately through the Other Comprehensive Income (OCI) statement.
Note: Actuarial gains and losses on Other Long-Term Employee Benefits plan continue to be required to be recognized through P&L.
2. Net Interest Cost:
Under AS 15 R, the interest cost on liabilities gets offset by the expected return on assets. Interest cost and expected return on plan assets are replaced with net interest income/cost on the net asset or liability recognized on the balance sheet. This net interest income or cost is measured based on the plan’s discount rate.
3. Qualitative Disclosures:
There is an increased focus on disclosures in terms of associated risks in the plan, future cashflows, assumptions sensitivities, detailed asset disclosures, and Information about the maturity profile of the defined benefit obligation.
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