Key differences between AS 15 Revised v/s IND AS 19
Accounting of Employee Benefits
IND AS 19 is the standard that governs the measurement, recognition, and disclosures of the employee benefit schemes. Before the introduction of IND AS 19, the companies followed the Revised AS for accounting of the Employee Benefits Liabilities.
The key Differences between AS 15 and IND AS 19 are as follows:
1. Valuation Interval
Under IND AS 19 – At the end of every quarter if the books are audited quarterly or on an annual basis
Under AS 15 – On an Annual Basis
Most of the entities that performed the valuation did it on an annual basis. However, companies are getting actuarial valuations on a quarterly basis for Smooth provisioning, Expense budgeting, and legislative requirements
2. Discount Rate
Under IND AS 19 – Yield on Government Bonds
Under AS 15 – Yield on Government Bonds or High-Quality Corporate Bonds
In India, the market for Corporate Bonds is often illiquid and hence most of the companies are likely to continue to take the yields on G-Sec rates. In the case of entities with foreign subsidiaries or partners, corporate bond yields may be considered in case those countries have a deep market for corporate bonds.
3. Heads in Statement of Profit & Loss
For Post-Employment Benefits, (termed as Remeasurements in the IND AS 19) be taken to Other Comprehensive Income and will not be reclassified into Profit or Loss in subsequent periods.
For Other Long Term Benefits, the Gains and Losses are booked in the P&L in line with AS 15
4. Service Cost
Under IND AS 19 – Includes Current Service Cost, Past Service Cost, Curtailment and Settlement Gains or losses
Under AS 15 – Above items are booked as separate heads in the Employee Benefit Expense
There is a change in presentation with no impact on the way in which the amounts are determined except the Past Service Cost (covered in the next point)
5. Past Service Cost
Under IND AS 19 – Booked immediately in the Employee Benefit Expense
Under AS 15 – The vested portion is booked immediately whereas the unvested portion is recognized on a straight-line basis till the vesting.
This will have an impact on the P&L. Any unvested unrecognized Past service cost as on the date of transition to IND AS will have to be recognized immediately in the P&L. As regards the impact on the Obligation due to any changes to the plan that may occur in the future will have to be recognized immediately in the P&L in the year of change.
6. Expected Rate of Return
Under IND AS 19 – This term is removed. The return on plan assets to be calculated using a discount rate
Under AS 15 – This was a separate assumption
The amount of income on plan assets will be different under the two standards if the ‘expected rate of return’ under AS 15 is different than the discount rate. This will impact the gains/losses on the plan assets and hence the total amount recognized in the Other Comprehensive Income and the Employee Benefits Expense.
7. Additional Requirement in IND AS 19 (Not present in the AS 15)
a. Quantitative Disclosures
- Bifurcation of the Actuarial Gains and Losses into Change in Financial Assumptions, Change in Demographic Assumptions and Experience Adjustments
- The sensitivity of the Obligation to the key assumptions
- Maturity Profile of the Liability – This is generally disclosed a number of benefit cashflows from the plan in the future years and age profile of the employees etc.
- Bifurcation of Assets into Quoted/ Unquoted Securities.
- Bifurcation of the Obligation into Vested and Unvested Portion
b. Qualitative Disclosures
- Narrative Description of nature of Third Party involved in operation and administration of the plan
- Narrative Description of risks that the plan poses to the company
- Asset Liability Matching strategy adopted by the company