The four categories of benefits

Learning objectives

• Identify, from the facts of a case, the category of an employee benefit (short-term, post-employment, other long-term, termination).L1
• Distinguish the four categories of benefits according to the timing of settlement and the triggering event.L1

Normative references

• IAS 19 §8Definitions: categories of benefits (short-term, i.e. expected to be settled wholly before twelve months after the end of the annual reporting period in which the service is rendered; post-employment; other long-term; termination benefits); defined contribution plan (fixed contributions paid into a separate entity, with no legal or constructive obligation to pay further contributions if the fund is insufficient) and defined benefit plan (any other plan); deficit or surplus (present value of the obligation less the fair value of plan assets), net defined benefit liability (asset) (the deficit or surplus adjusted for the effect of the asset ceiling) and asset ceiling (present value of the refunds or reductions in future contributions available); plan assets (assets held by a legally separate fund dedicated to the benefits, and qualifying insurance policies, not available to the entity's creditors); past service cost (change in the obligation for prior service resulting from a plan amendment or a curtailment, the latter being a significant reduction in the number of employees covered); settlement (a transaction that eliminates all or part of the obligations, other than benefits provided for in the plan terms and included in the actuarial assumptions).
• IAS 19 §11Short-term employee benefits expected to be paid in exchange for service rendered are recognised at the undiscounted amount, as a liability and an expense, unless another Standard requires or permits their inclusion in the cost of an asset; given their short maturity, no discounting is applied.
• IAS 19 §153Other long-term employee benefits include, if not expected to be settled wholly within twelve months after the end of the annual reporting period in which the service is rendered, long-term paid absences, jubilee or other long-service benefits, long-term disability benefits, profit-sharing and bonuses and deferred remuneration; their simplified accounting is set out in paras. 154 to 156.
• IAS 19 §165A liability and an expense for termination benefits are recognised at the earlier of the following dates: when the entity can no longer withdraw the offer of those benefits, and when it recognises restructuring costs within the scope of IAS 37 that involve the payment of termination benefits.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• Orvale SA grants several benefits to its employees. Which of these pairings of a benefit with its employee-benefit category is correct?L1
• An annual bonus that pays for the year's services and is paid in March of the following year is an other long-term benefit, since payment falls after the reporting date.L1
• Orion SA grants its employees a jubilee benefit paid after 25 years of service; it is not expected to be settled wholly within twelve months after the end of the annual reporting period in which the related service is rendered (case facts). In which category of employee benefits does IAS 19 place this benefit?L1