Gratuity Accounting Standard 15
GRATUITY is a type of employee benefit plan known as a Defined Benefits Obligation (DBO) Plan. Since The term ‘gratuity’ is derived from the word gratitude, and it refers to a thank you expressed by the company to its employees. So lets read more about Gratuity Accounting Standard 15.
Also an employee earns gratuity for each year of service rendered to the company under a gratuity plan. So this benefit accrues for each additional year the employee serves the company. This gratuity payment becomes due when the employee leaves the company. We also give a value to a company’s gratuity obligations using actuarial valuation principles. Also we present in the gratuity report, which we require for the company’s financial audit.
Also The Institute of Chartered Accountants of India (ICAI) has issued two Accounting Standards that outline the accounting and disclosure requirements for Defined Benefit Plans: –
1. ACCOUNTING STANDARD 15 (2005 REVISION) – AS 15 (REVISED 2005)
2. IND AS 19 – INDIAN ACCOUNTING STANDARD
According to Indian Accounting Standards, such as IND AS 19 and AS 15(R). Gratuity is accounted for as a liability when the employee renders service to the company and is recognized as an expense when the company consumes benefits arising from the employee’s services.
How we Determine Gratuity Value?
Accounting Standard – Also There are various ways to summaries a statutory Gratuity:
15/26 * years of the previous service * final salary = benefit formula
Death, disability, resignation (attrition), and retirement are all benefit events.
In the case of resignation and retirement, the vesting period (i.e. minimum service period) is 5 years.
SHORT-TERM (PAYABLE IN 12 MONTHS)
- Absences compensated (NO DISCLOSURE)
- Define contribution;
- Define benefit Pension;
- Post-retirement medical examination
OTHER LONG-TERM CONCERNS:
- Privilege leave;
- Sick leave;
- Long-term investments;
- Loyalty bonus;
No specific information was provided.
People also ask –
- What does Accounting Standard 15 stands for?
- Where is gratuity shown in balance sheet?
- Is actuarial valuation compulsory for gratuity as 15?
- What is the provision for gratuity?
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