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IAS 19 employee benefits. Fair value of program assets

Consider the basic rules for the recognition and disclosure of information under IFRS on all kinds of remuneration provided to employees by employers.

IAS 19 Employee Benefits prescribes rules for recognizing and disclosing the different types of benefits that employers provide to their employees.

For example, you may have read or heard about the rewards that Google provides to its employees. To name a few of them (besides the usual salaries): free haircuts, gourmet cuisine, high-tech toilets, health care on site, travel insurance, fun things to do near the office, paid maternity leave, etc.

Google even provided "indemnity in case of death at work"- If a Google employee dies while on the job, their spouse continues to receive 50% of the employee's annual salary for the next decade.

But now let's look at all this from the point of view of financial director. Problems considering remuneration such as wage or free haircuts no. But what about this death benefit?

The problem here is that the remuneration is not paid while the employee is working in the company ... only then. And Google doesn't really know when employees die, and therefore when the liability is due.

And here IAS 19 plays its decisive role. It explains how to take into account different kinds employee benefits and how to represent them in financial reporting.

Why IAS 19?

The main objective of IAS 19 is to define the accounting and disclosure rules for employee benefits. IAS 19 requires a company to recognize:

a liability if the employee rendered a service in exchange for remuneration with payment in the future; as well as
expenses if the company derives economic benefit from the services rendered by the employee in exchange for remuneration.

This is a clear demonstration matching principle- recognition of expenses in the period of recognition of the corresponding income.

Thus, Google must recognize:

a liability for his posthumous remuneration when the worker actually works (and not when he dies);
expense when the results of an employee's work are consumed.

Classification of employee benefits.

IAS 19 classifies employee benefits into 4 main categories:

Short-term rewards;
Compensation upon graduation labor activity;
Other long-term remuneration;
Severance allowances.

Short-term employee benefits= employee benefits (other than termination benefits) that are expected to be fully paid before the end of the 12-month period following the end of the annual reporting period in which employees render the related service.

Post-employment benefits= employee benefits (other than severance pay and current employee benefits) that are payable after the end of employment.

Other long-term benefits ("other long-term benefits")= all employee benefits other than current employee benefits, post-employment benefits and termination benefits.

Termination benefits= employee benefits given when an employee leaves the company as a result of:

(a) the company's decision to terminate an employee before the employee's normal retirement date; or
(b) an employee's decision to accept an offer of remuneration in exchange for leaving the company.

Now, what category do you think Google's posthumous reward falls into? Let's find out further.

What is short-term employee benefits?

Short-term employee benefits include all of the following (if payable within 12 months after the end of the reporting period):

wages, salaries and social security contributions;
annual paid leave and paid sick leave;
employee participation programs in the company's profits ("profit-sharing") and bonuses (premiums); as well as
non-monetary benefits (such as medical care, housing, cars, and free or subsidized items for employees).

All of Google's spending on free haircuts or gourmet meals probably falls into the latter category.

How to account for short-term employee benefits?

The Company recognizes short-term employee benefits as an expense in profit or loss (unless another IFRS requires or permits the benefits to be included in the cost of an asset).

Expenses are recognized in the amount of short-term employee benefits that are expected to be paid.

The accounting entry looks like this:

Debit. Employee benefit expense (profit or loss) or cost of another asset (statement of financial position).
Credit. Liability to employees or accrued expenses or cash if they are paid.

Short-term paid holidays: the expected value of current paid leave is recognized:

when an employee provides services, which gives him the right to accumulate future paid holidays (in the case of accumulation of unused paid holidays);
or when the employee took vacation.

Employee profit sharing and bonuses: an entity must recognize a liability for profit sharing and bonuses if

the company has a legal or constructive (implied by it) obligation to make such payments; And
a reliable estimate of this obligation can be made.

The above obligation exists if and only if the company has no actual alternative but to pay the consideration on this obligation.

What is post-employment benefits?

Post-employment benefits include benefits such as various pensions, retirement benefits, life insurance and after-service health care.

There are two main types pension programs:

Defined Contribution Programs;
Defined Benefit Programs

It is extremely important to understand the difference between the two and classify your pension plan correctly, as each of them has a different accounting procedure..

What are defined contribution pension plans?

Defined contribution plans are post-employment benefit programs under which a company pays fixed contributions to a separate organization Pension Fund).

However, the company does not assume a legal or constructive obligation to make additional contributions if the fund does not have sufficient assets to pay all employee benefits due to employees in the current and past periods.

How to account for defined contribution pension plans?

An employer must recognize its contributions to a defined contribution plan as an expense in profit or loss (unless another IFRS requires or permits the remuneration to be included in the cost of an asset).

If contributions are not expected to be fully repaid before 12 months after the end of the reporting period, they must be discounted.

What are defined benefit pension plans?

Defined benefit programs are post-employment benefit programs that are not defined contribution plans. Under such a program, the employer is required to pay a certain amount of compensation to the employee, and all investment and actuarial risk is thus borne by the enterprise.

This is where we come to the answer to the question about Google: without any further details, it can be assumed that Google's posthumous benefit is accounted for as a defined benefit plan under IAS 19 because:

it is paid at the end of employment (after the employee dies);
Google's commitment is not limited to contributions to any fund; instead, Google's liability is contingent on future wages, and so the actuarial risk falls on Google.

Accounting for defined benefit plans is probably one of the more complex issues in IFRS because it involves the inclusion of actuarial assumptions in the valuation of liabilities and expenses. Therefore, there are actuarial gains and losses.

In addition, liabilities are valued for the time value of money, as they may be repaid many years after employees have rendered the related service.

How to account for defined benefit pension plans?

Employers must complete the following steps to account for a defined benefit program:

Step 1: Determine the deficit or surplus.

The deficit or surplus is the difference between the present value of the defined benefit obligation and the fair value of the program assets at the end of the reporting period. To determine it, the company must:

estimate the final value of the reward.
use projected unit credit method to estimate how much workers earned for their work in the current and previous periods and include an estimate of demographic and financial variables ( "actuarial assumptions") into the calculations.
discount the amount of the consideration to determine the present value of the obligation and the cost of services in the current period.
subtract fair value any program assets from the derived present value of the liability.

Step 2. Determine the amount for the statement of financial position.

Although it is sufficient to determine the amounts of benefits to account for a defined benefit plan, IAS 19 requires them to be presented as a single figure on the statement of financial position - the net amount of a defined benefit liability (asset) that is primarily a deficit or surplus. calculated in step 1, but adjusted for the influence limit value assets.

Asset ceiling ("asset ceiling") represents the present value of any economic benefits accruing from the return of amounts from the program or the reduction of future contributions to the program.

Step 3: Determine the amount for the income statement.

The Company records the following amounts in the income statement:

The cost of services of the current period= increase in the present value of defined benefit liabilities as a result of the provision of services by employees in the current period;
Cost of past services= change in the present value of the defined benefit obligation in prior periods as a result of a program change or reduction;
Any gain or loss on settlement of the obligation;
Net interest income or expense on a defined benefit obligation (an asset).

Step 4: Determine the revaluation for the statement of other comprehensive income.

The Company records the following revaluation in the statement of other comprehensive income:

Actuarial gains and losses= changes in the present value of defined benefit obligations as a result of experience adjustments or changes in actuarial assumptions;
Income from program assets, excluding amounts included in the net interest on the net defined benefit liability (asset).
Any change in the impact of the asset limit.

What are other long-term benefits?

Other long-term benefits include the following items (unless expected to be settled within 12 months of the end of the period in which the employee provides the related service):

long-term paid holidays such as sabbatical;
anniversary or other long-term awards;
long-term disability benefits;
profit sharing and bonuses; as well as
deferred reward.

How to account for other long-term benefits?

Because other long-term benefits are not subject to the same uncertainty as defined benefit plans, they are slightly easier to account for.

However, the entity must follow the same steps as for defined benefit schemes. The only difference is that all items, such as employee costs and revaluation of the net defined benefit liability (asset), are recognized in profit or loss. Therefore, they are not recognized in other comprehensive income.

What is severance pay?

Termination benefits are something completely different than the previous 3 categories. Why? Because they are not provided in exchange for an employee's service; instead of this they are provided in exchange for stopping work.

However, be careful, because severance pay sometimes includes both a termination fee and an employee's service fee at the same time.

For example, a company is closing one of its manufacturing enterprises and offers a bonus of CU1,000. to all employees who will be laid off. But since this company needs qualified employees to complete the closing procedure, it offers a bonus of CU3,000. to every employee who will remain with the company until the closing date.

In this small example, the CU1,000 bonus paid to all laid-off employees is a severance pay, and the additional CU2,000 paid to all employees who stay until closing are employee service fees, in primarily classified as other non-current in accordance with IAS 19.

How to account for severance pay?

The key question here is WHEN the liability and termination benefit costs should be recognized. It will be:

when the company can no longer refuse to pay these benefits (either there is a severance pay program or the employee accepts an offer of severance pay),
when an entity recognizes restructuring costs (see IAS 37) and therefore offers termination benefits to employees.

The next question is HOW to recognize severance pay. It depends on the specific conditions of the rewards:

if termination benefits are expected to be paid in full within 12 months of the end of the reporting period, then they are subject to current employee benefit requirements (therefore they are recognized as an expense in profit or loss on an undiscounted basis);
if termination benefits are not expected to be settled in full within 12 months after the end of the reporting period, then they are subject to the requirements of other long-term employee benefits (therefore, they are recognized as an expense in profit or loss on a discounted basis).

IFRS 19 "Employee Benefits" defines approaches to accounting for the company's costs of paying employees during and after their employment, as well as the sequence of disclosure of information about them in the company's financial statements. IN this standard This includes all forms of employee benefits, including wages and pensions.

The scope of the standard is the recording of employee benefits, including pension plans, in the accounting of the employing company. Formation of reporting on pension plans, in addition, is regulated by IFRS 26 "Accounting and reporting on pension plans" (see clause 8.4.2 of the textbook).

IAS 19 defines employee benefits as all forms of remuneration and payment by an entity to an employee in exchange for their performance (in exchange for the employee's services).

Employee benefits include:

1) current remuneration carried out:

a) in cash (salary, bonuses and bonuses, social security contributions, payment of annual paid
vacations, sick leave pay, maternity leave, parental leave, mobile phone use
telephone and vehicles),

b) in non-monetary form (provision of housing, vehicles,
medical care, etc.);

2) remuneration at the end of employment (pen
these and other retirement benefits, life insurance and post-employment medical care);

3) other long-term employee benefits (for example,
vacation pay for an employee with a long work experience);

4) severance pay;

5) share payments financial instruments(options).
Under severance pay the standard implies payments in connection with the dismissal of an employee who has not reached retirement age, including dismissal for own will employee in case of redundancy in exchange for payment of benefits.

Equity payments involve both actual payments in the company's shares and similar instruments, and obligations to make other future payments linked to the value of the company's shares. Accounting for such payments is governed by IFRS (1FRS) 2 Equity Payments, effective from January 1, 2005.

The listed types of remuneration can be divided into two enlarged groups:

1)short term payments- remuneration due to you
payment no later than 12 months from the date of performance by the employee
work (include wages, profit sharing, bonuses
and bonuses, health insurance, and paid absence from work, such as sick leave, paid
another vacation or additional leave for years of service);

2)long-term benefits (post-employment benefits) - severance pay, which is compensation payments upon dismissal or redundancy, and you
post-employment benefits (for example, pensions).

The classification of employee benefits is shown in Figure 8.7

Figure 8.7

Rice. 8. 7. Temporary classification of forms of employee remuneration

Shown in Fig. 8.7 classification determines the accounting treatment of employee benefits and the reflection of this information in the reporting of the employing company.

Assessment and accrual of short-term payments. Short-term employee benefits can be presented in the form of current wages, bonuses, accumulative paid holidays, non-accumulative paid holidays, payments having the nature of profit distribution. The company needs to correctly estimate and timely recognize each type of expected payments.

Wage obligations. After an employee of the company has completed his work during the reporting period, the company, guided by the accrual principle, must recognize in its accounting the amount of the current remuneration payable for this work. This obligation of the company can be reduced by the amounts already paid to the employee.

The debit balances of previously paid advances on wages in the reporting are recognized as the assets of the company in the amount in which their future return or offset is possible. The accrual of the obligation corresponds to the accrual of expenses for the period (with the exception of remuneration attributable to the increase in the cost of production in accordance with IFRS 2 Inventory, IFRS 16 Property, Plant and Equipment, IFRS 38 Intangible Assets, etc.).

Obligations to pay current premiums. The accounting procedure for current bonuses usually corresponds to the accounting procedure for current wage arrears to the employee. The accrual of the obligation occurs after the issuance of the order of the company's management on bonuses to the employee. Liabilities for bonuses that have the nature of a legal or recognized obligation in economic practice, for example, the payment of bonuses based on the results of the financial year, are reflected differently. If the decision to award bonuses is made before the date of preparation of the financial statements, then the bonus is recognized as a liability in the balance sheet at the end of the reporting year. In this case, two conditions must be met:

1) the payment of such bonuses is a regular practice of the company;

2) the algorithm for calculating the premium allows you to evaluate it ahead of schedule.
Obligations to pay non-accumulative and accumulative paid holidays. TO non-accumulative paid holidays include sick leave, leave granted in connection with the performance of public duties, leave to care for a child, etc. Liabilities to pay for such vacations are recognized when the vacation occurs. They are accounted for as a liability when employees provide services that increase their entitlement to future leave. These rights increase every month during the year, even if the leave is non-compensated and the obligation may disappear with the dismissal of the employee. Such liabilities are measured at the amount expected to be paid to the employee for unused vacation accumulated at the reporting date.

Non-accumulative paid holidays are not carried over to future periods: they disappear if they are partially used in the current period. In addition, the employee is not entitled to receive monetary compensation for unused vacation.

Obligations to pay accrued paid holidays. Unlike non-accumulative holidays accumulative paid holidays can be carried forward and used in subsequent periods if they have not been fully used in the current period.

Obligations for payments having the character of distribution of profits(also called “participation plans”) arise in connection with the services provided by the employee. They become a consequence of the contractual relationship of the employee not with the owners of the company, but directly with the company. In this regard, they, like wage arrears, are reflected in accounting as an expense, and not as a distribution. net profit unless they show evidence of payment in equity instruments.

If the benefit obligations under the participation plans are not settled in full within 12 months after the end of the period in which employees render the related service, then these benefit obligations are reclassified to long-term employee benefits.

Therefore, current benefits are recognized immediately on an accrual basis. No difficulties arise in this case, since the size of the obligations is known: they are determined by contractual relations with employees. The valuation of these liabilities does not require actuarial valuations and the use of discounting.

For long-term forms of remuneration, especially end-of-employment benefit obligations, valuation is a more complex process.

Assessment and accrual of long-term payments. According to the accrual principle, IFRS 19 dictates the need to accrue in accounting and recognize in the financial statements the obligations of the company-employer for long-term employee benefits. It is believed that the length of service of an employee in the company gives rise to certain rights to such payments. Each year an employee works for the company results in “earning” certain rights to future compensation. As a result, there are long-term obligations of the company to the employee for remuneration.

IFRS 19 defines four types of long-term benefits:

1) severance pay;

2) remuneration at the end of employment;

3) other long-term remuneration;

4) shared compensation payments (Fig. 8.8).

Rice. 8.8. Content of long-term employee benefit obligations

Severance allowances. These benefits are separated into an independent group due to the fact that the reason for the emergence of such obligations is the termination, and not the continuation of the worker's activities.

The standard provides methods for assessing liabilities to employees for long-term benefits, methods for correlating these liabilities with the length of service. Their application allows the company-employer to assess the rights of each employee to the payment of long-term labor remuneration. These methods are quite complex and require discounting and actuarial calculations.

Post-employment benefits. Such benefits are paid to employees on the basis of formal and informal agreements concluded between the employee and the employing company. For these purposes, the company makes cash contributions to specially formed funds, the latter invest them to generate additional income. This investment is expected to help the company meet its future pension obligations. These activities are carried out under agreements called post-employment benefit plans (pension plans).

A pension plan can be defined as a set of conditions that set the rules for making long-term benefits in connection with an employee's retirement, as well as ways to finance them.

In IAS 19, a pension plan is defined as follows. This is a plan under which a company pays fixed contributions to a separate fund acting as a separate legal entity (for example, a pension fund) and does not incur any obligations if this fund is unable to pay benefits in full (for example, in the event of insolvency). ). The funds received by the fund are invested and used for settlements with pensioners when the pension payment period comes. Thus, the fund is an organization that has its own assets and has obligations to pensioners. It must be understood that payment obligations remain with the employing company, the pension fund is the instrument by which the company fulfills its obligations.

The standard reveals the content of the concept "assets held by the fund". These are the assets:

Placed in a fund specifically created to fulfill long-term reward obligations
employees;

To be used only for the payment of employee benefits. Pension fund assets cannot
be returned to the company.

In table. 8.5 provides information on the assets and liabilities of a pension plan (specially created for the purpose of accruing and paying remuneration to a legal entity).

IFRS 19 describes group-employer pension plans, government pension plans, and pension plans with insured benefits.

Table 8.5

(million dollars)

Pension Plan Assets and Liabilities

Long-term reward plans vary by degree of funding- backing of liabilities with plan assets. Pension plans that do not create cash reserves to pay benefits are funded. Making payments, accompanied by the creation of reserves and their subsequent investment, indicates the presence of an unfunded pension plan.

For accounting purposes, another classification is also important. The standard divides pension plans into defined benefit plans and defined contribution plans, distinguishing between them. When defined contribution plans companies pay contributions in the form of fixed interest from the salaries of employees, often the employees of the company themselves participate in these plans. The amount of payments awaiting an employee upon retirement depends on the value of the assets that will be accumulated by the pension fund under the pension plan, and the profitability of the fund itself.

In the case of participation in pension plans with defined contributions, all risks of underfunding are borne by the employee of the company. The rest of the plans the standard refers to defined benefit plans. Guided by them, the company assumes a direct obligation to provide defined pension payments (Fig. 8.9).

The correct identification of a pension plan with one of the two selected groups is important because the information in the reporting is disclosed in each case in its own way. For defined contribution plans, only information about the amount of contributions paid is reported, and long-term benefit liabilities are not recognized in the financial statements. In contrast, defined benefit plans require the employing company to disclose information about the amount of the plan's obligations.

Figure 8.9

Rice. 8.9. The place of the pension fund in the system of relationships

company-employer with an employee-recipient

cash payments

Treatment for defined contribution plans. This order corresponds to the accounting of current wages. As a rule, these objects are reflected in the accounting of the company at the same time. Accrued pension plan contributions are recognized as a liability on the company's balance sheet immediately upon receipt of services from the employee (net of any advance payments made to the pension fund). The debit balances of previously paid advances are included in the company's assets to the extent that their future return or offset is possible. Accounting is carried out on an accrual basis. Liabilities are accrued in correspondence with the account "Expenses of the reporting period", excluding remuneration attributable to an increase in the cost of production (in accordance with IFRS 2 "Inventories"), fixed assets (IFRS 16 "Fixed assets"), intangible assets (IFRS 38 "Intangible assets”), etc. Thus, in the statement of comprehensive income presented as of the reporting date, information will be disclosed on the company's accrued expenses for long-term employee benefits, in the balance sheet - debt on contributions or their prepayment.

Content and procedure for developing defined benefit plans. By implementing (funding) pension plans with defined benefits, the company assumes all risks, undertakes to pay current and former employees fixed amount rewards. The problem in this case is to estimate the size of the current deductions. In such situations, companies turn to actuaries- specialists in the field of calculation of pension obligations. The calculations and estimates they perform are called actuarial. actuarial valuation obligations is a task, the solution of which requires the use of special actuarial methods.

In his calculations, the actuary uses a variety of sources of information: documents regulating the terms of payments; financial information about the plan (pension required, contributions made, fund assets, etc.); stock market returns; interest (discount) rate; information about inflation; databases of company employees (working and retiring). Even the probability of death in the line of duty is taken into account in the calculations.

The actuary starts the valuation by analyzing the historical data, then builds a dynamic model personnel. Assumptions are also made about the discount rate, the dynamics of wage growth, benefits, inflation and other assumptions, the requirements for which are defined by IAS 19. For example, the standard requires the use of "unbiased and mutually acceptable assumptions."

The actuarial valuation of long-term benefit liabilities is carried out individually for each employee on the basis of a database using automated calculation methods.

The actuary then tells the company how much of the cash contribution it needs to make (what the cost of the employee's current services) to be able to meet future obligations. As a rule, we are talking about the amount of a percentage of wages, which is subject to monthly transfer to the account of the pension fund.

Accounting for defined benefit plans. Employees' past service cost is expensed on a straight-line basis over the projected length of service required to qualify the employee for a retirement pension. If the right has already been earned, the employee's past service cost is recognized as an expense immediately. Financial result - profit (loss) received from the implementation (sequestration) of a defined benefit plan or as a result of its settlement, is recognized as profit (loss) when sequestration or settlement.

To disclose information about a defined benefit pension plan in the financial statements, it is necessary to calculate a number of indicators carried out at individual stages of accounting (Fig. 8.10).

Figure 8.10

Rice. 8.10. Accounting procedure for pension plans

defined benefit

Under sequestration refers to a significant reduction in the pension plan, caused, for example, by a company restructuring.

Consider the content presented in Fig. 8.10 stages.

To measure actuarial liabilities, IFRS 19 recommends applying projected future unit method. It consists of apportioning the actuarial present value of benefits to years of service on a pro rata basis. Actuarial Present Value (ARC) benefits is the discounted value of benefits calculated at the reporting date, taking into account the existing probability of receiving long-term benefits. It is determined by predicting two indicators:

1) the amount of obligations;

2) valuation of the current work experience.

The first indicator characterizes the part of the long-term remuneration that is “earned” by the employee (or should be accrued). The second indicator reflects the part of the future remuneration that is accrued during the period until the employee's retirement. This is the share of the value of the remuneration "earned" by the employee for the year of service.

Example 8.19

Work experience of employee I.I. Sidorov is 25 years old. Retirement *i is planned at age 60. At the time of the assessment, Sidorov was about 50 years old. To determine the size of the lump sum paid § upon retirement, the company where Sidorov works has created a special methodology. It is based on a formula that allows you to take into account the length of service of an employee. It is required to evaluate the obligations and the value of the current service to determine the lump-sum allowance paid in connection with Sidorov's retirement.

Since the alleged experience of I.I. Sidorov before his retirement -35 years, the following calculations are performed.

1. Sidorov's salary is predicted at the time of his retirement.

2. Taking into account his projected length of service and projected salary
the estimated amount of remuneration is calculated.

3. Multiplying the result by the discount rate and adjusting it for the probability of receiving a reward, the APV of payments is calculated.

Suppose that as a result of the actions taken, the APV remuneration amounted to 50 thousand rubles.

4. Liabilities represent the proportion of this amount accruing at the time of the assessment. This share is determined by decomposing the APV of remuneration in proportion to the employee's projected seniority:

50 x (25: 35) - 35.7 (thousand rubles).

5. The value of the current service is the amount accrued during the evaluation period, and therefore it is proportional to the duration
period being assessed. With a period of one year, the value of the current
experience will be

50 x (1:35) = 1.4 (thousand rubles).

For valuation of pension plan assets different methods may be used. IAS 19 recommends that if any physical assets can be identified with pension plan assets, then their market value should be taken as the value of the plan assets.

Actuarial gains and losses arise as a result of repeating the procedure for assessing the assets of the pension plan and liabilities for long-term pension payments. The reasons for actuarial gains are that the actual changes in the liabilities and assets of pension plans during the reporting period always differ from the actuarial assumptions made at the valuation date. Actuarial gains also result from changes in actuarial assumptions.

Example 8.20

During the actuarial valuation, the rate of return on the assets of the pension plan was estimated at 15% per annum. The actual value of this indicator for 2012 was 16%. As a result, an actuarial gain on assets appeared, which was to be reflected in the company's financial statements for 2012.

Specific guidance in IAS 19 is given in relation to the calculation of past service cost. Past service cost (past service cost)- the increase in the present value of the defined benefit obligation in connection with the work of employees performed during past periods, which arises in the current period as a result of the introduction of new or changes in existing post-employment benefits or other long-term benefits.

The cost of past service is recognized in the financial statements on a straight-line basis over a number of years. The period during which this amount is written off in full is calculated as the average period for all employees until the vesting of benefits 1 .

1 Benefit vesting date is the moment when entitlement to benefits becomes inalienable.

If the benefits are guaranteed immediately after the establishment of the defined benefit plan, then past service costs should be expensed immediately.

Example 8.21

The company has a defined benefit pension plan. According to this plan, upon retirement, for each year of work, the employee is accrued a pension in the amount of 1.5% of wages. This pension benefit becomes guaranteed after six years of service with the company. Effective January 1, 2012, the company increased the pension remuneration to 2% of wages for each year worked beginning in 2005. At the time of the increase, the discounted value of additional remuneration for work during the period from January 1, 2005 to January 1, 2012 was formed as follows: image:

For employees with more than six years of work experience - $300,000;

For employees with less than six years of service - $240,000
The average time until pension benefits become guaranteed is two years.

It is necessary to determine the procedure for recognizing arrears in the payment of pension benefits.

$300,000 should be recognized as a liability immediately, as these fees are already guaranteed. The amount of $240,000 should be recognized in the financial statements evenly over two reporting periods starting from the financial statements for 2012.

Past service cost is included in the calculation of actuarial gains (actuarial losses). In addition to it, changes in the following indicators are taken into account:

The cost of current services provided to the company by the employee;

Expected investment income (in the form of interest, dividends and asset appreciation) from the assets of the pension plan;

IFRS 19 provides the following definitions of these concepts.

The cost of current services - an increase in the present value of the defined benefit obligation due to work performed by the employee in the current period.

Example 8.22

Information about the assets and liabilities of the pension plan for 2012 is presented in the table. There is no actuarial gain (loss) at the beginning of the period.

It is necessary to estimate the actuarial gain (actuarial loss) of the reporting year.

Indicator	Sum
1. As of January 1, 2012:
	2 000
	(2 000)
2. During 2012:
cost of current services, USD;
contributions paid to the fund, dollars;
paid pension benefits, USD	(260)
Actuarial Assumptions:
interest rate, %
return on investment, %
As of December 31, 2012:
market value of plan assets, dollars;	3 100
present value of plan liabilities, USD	(2 800)

1. Forecast the value of the obligations of the pension plan at the end
2012 (assuming the actuarial assumptions made at the beginning of the year are correct
by 100%). The calculation is carried out according to the formula

Expected value of obligations at the end of the year » = Value of obligations at the beginning of the year + Cost of current services + + Interest cost - Pension benefits paid.

Interest cost = 2000 x 10: 100 = $200 Then the expected value of liabilities at the end of the year = 2000 + 250 + 200 -260 = 1790 (USD).

2. Let's forecast the value of pension plan assets at the end of 2012.
(provided that the actuarial assumptions made at the beginning of the year are correct for
one hundred%). The calculation is carried out according to the formula

Expected value of assets at the end of the year = = Value of assets at the beginning of the year - Pension benefits paid + Interest income + Contributions paid into the fund. Interest income - 2000 x 15: 100 - 300 (USD). Then the expected value of assets at the end of the year = 2000 - 260 + 300 + 160 = = 2200 (USD).

3. Calculate the actuarial gain and actuarial loss:

Actuarial loss - 2800 - 1790 - 1010 (USD);

Actuarial profit - 3100 - 2200 » 900 (USD).

IAS 19 allows for three methods of recognizing actuarial gains and losses. The content of the methods is presented in Table. 8.6.

A.G. Sholomitsky, 2005

Disclosure of information on social benefits under IFRS 19

Alexey Sholomitsky,

Docent State University ─ high school economy,

Actuary of the Actuarial and Financial Service,

Candidate of Physical and Mathematical Sciences

Employee benefits as a source of long-term liabilities of companies

IFRS 19 Employee Benefits governs the disclosure of employee benefits in the financial statements of companies. All payments are classified into short-term (fully paid within 12 months after the end of the reporting period), such as wages, vacation pay, etc., and long-term.

An example of a long-term benefit common in Russian companies─ Lump sum upon retirement. Suppose an enterprise pays employees retiring an amount that depends on the salary of the employee and his length of service. In this case, the payment is classified as long-term (or, better, deferred). Another example of such payments is pension payments and material assistance to veterans and pensioners (usually these are former employees of the enterprise). Such payments can be made by companies directly or financed through pension, charitable and other funds.

Short-term payments are recognized immediately, with which there are no difficulties, since their amounts are known. However, the situation is more complicated in the long term. As you know, IFRS uses the so-called accrual basis as an accounting principle, which provides for accounting not at the time of actual payment, but at the moment the right to it arises. It is in connection with this that there is a need to take into account liabilities for long-term benefits. An employee's length of service in a company is considered to give rise to certain entitlements to benefits. Each year an employee works for the company results in “earning” certain rights to future benefits. The amount of liabilities incurred in relation to employees is subject to disclosure in the form of long-term liabilities of the company.

IAS 19 defines methods for measuring these liabilities, as well as methods for attributing liabilities to periods of service, i.e., in other words, methods for calculating the rights "earned" by each individual employee during the reporting period. These methods are quite complex and require the use of actuarial calculations.

IFRS 19 distinguishes between two main types of long-term benefits: post-employment benefits and other long-term benefits. An example of the second type of allowance is an anniversary or long service bonus (for example, for 20 years of continuous service), which are also often paid by Russian enterprises.

Subject of assessment: pension plan

A pension plan (or program) can be defined as a set of conditions that govern the payment of benefits, as well as how they are funded. From an actuarial point of view, in order to value a company's liabilities, it is necessary to describe the cash flows within the pension plan and how the liabilities are formed.

There are two main types of pension plans: defined benefits (Defined Benefit, DB) and defined contributions (Defined Contribution, DC). The difference between these plans is defined in IAS 19. It is very important because the disclosures for them are completely different. For DC plans, only the amount of premiums paid is disclosed, while for a DB plan, the amount of plan liabilities must be disclosed. Thus, the DC plan does not give rise to long-term reporting obligations, unlike the DB plan.

According to latest edition IAS 19 DC A plan is a plan in which an entity pays contributions to a separate fund (which must be a separate legal entity eg NPF) in a fixed amount, and does not bear any obligations in the event that this fund is unable to pay benefits in full (for example, in the event of NPF insolvency). Generally, in DC plans, companies pay contributions as a fixed percentage of employees' salaries; often the workers themselves contribute to such plans.

All other plans are recognized as DB plans (IFRS 19.6). It is important to note that this paragraph of the Standard establishes the requirement to evaluate not only formalized, but also so-called constructive obligations. If the first obligations follow from the amounts of benefits determined by certain documents, then the second ones are obligations arising from the established practice of payments (therefore they are also called "traditional" obligations).

Example. A large enterprise in the metallurgical industry pays (from profit) one-time retirement benefits and quarterly material assistance to pensioners (former employees) of the enterprise. IN collective agreement it is indicated that the amount of lump-sum benefits is calculated by multiplying the coefficient depending on the length of service (from 2 with a length of service of at least 10 years to 6 with a length of service of 30 years or more, the formula is given) by the average monthly earnings. The amount of quarterly financial assistance is not clearly regulated in the Collective Agreement. In this case, the obligation to pay lump-sum benefits should be assessed as formalized, based on the formula given in the Collective Agreement. And the obligations to pay quarterly financial assistance are assessed as constructive, based on actually ongoing payments. The continuation of these payments is considered as a constructive obligation of the company. Both types of payouts are valued as DB payouts.

Benefit plans (particularly DB plans) can vary in terms of funding levels. Funding refers to the provision of liabilities with plan assets. Plans where payments are made without creating any cash reserves are unfunded. Funded plans provide for the creation of reserves and their investment. IN Russian practice usually such plans are implemented through non-state pension funds.

Commitment Estimation Method for DBplan

IFRS 19 (par. 64 ─ 71) prescribes the use of the so-called projected unit-credit method (“projected credit unit method” in the Russian translation of IFRS) to measure DB liabilities. The essence of this method is to "distribute" the actuarial present value of payments by years of service on a proportional basis. The Actuarial Present Value (APV) of benefits is the amount calculated as the present value of benefits, taking into account the probabilities of receiving benefits. It is calculated on the basis of "designing" (forecasting) the required values for the future.

This method calculates two main values: obligations (bonds) and the cost of the current service (current service cost, CSC). The first shows the part of the value of the benefit that is "earned" (or should be accrued) at the time of assessment (end of the reporting period). The second gives that part of the cost that accrues during the period.

Example. For some worker, it is required to evaluate the liability and CSC for the payment of a lump sum; the amount of the benefit is determined by the formula depending on the length of service, as described in the previous example; Retirement is projected at age 57. At the time of assessment, the employee is exactly 47 years old, the experience is 15 years. Then the projected length of service at the time of retirement will be 25 years. The salary projected at the time of retirement is calculated (taking into account the expected salary growth); on the basis of this patch and the projected seniority, the projected amount of the allowance is calculated. To calculate the benefit APV, multiply this value by the discount factor and by the benefit probability factor.

Suppose that as a result, the benefits received by APV amounted to 45 thousand rubles. Then the liabilities will be the share of this amount accrued at the time of valuation, based on the decomposition proportional to the length of service: liabilities = 10/25 × 45 = 18 thousand rubles.

CSC is calculated as a share accrued during the evaluation period. Therefore, it is proportional to the length of the period. Let's say that in our example the period is 1 year; then CSC=1/25×45 = 1.8 thousand rubles. This is the proportion of the value of the benefit "earned" by the worker during the year of service.

Disclosure

To form the amounts disclosed in the financial statements, some more values are calculated.

Plan Asset Value can be calculated in different ways. If assets can be identified with some set of physical assets (for example, valuable papers), then the most common estimate is by market value. This is the method recommended by IAS 19. It should be noted that IAS 19 defines plan assets as assets held solely for pension benefits that cannot be returned to the company.

Example. The Russian company's pension plan was financed by transferring funds to pension accounts with the NPF: part of the funds was deposited into the company's solidarity account, and part ─ into the registered accounts of employees. When assigning a pension from the company's solidarity account, the NPF reserves on the solidarity account an amount sufficient (according to the NPF tariff) to pay for the future lifelong pension. The company's pension agreement with the NPF states that these amounts are not returned to the company upon termination of the agreement, the redemption amount is equal only to the “unreserved balance” on the account. When assessing the plan assets, the amount of assets, at the request of the auditor, included only the amounts reserved in the solidarity account, as well as the amounts in individual accounts. The "unreserved balance" in the solidarity account was not included in the plan's assets on the basis that it could be returned to the company upon termination of the contract.

Actuarial gain/loss represents financial results planned during the reporting period. The need to calculate this kind of financial results arises in life insurance and pension plans due to the fact that the activities of life insurance schemes and pension schemes are associated with the existence of obligations and the need to reserve against these obligations. Therefore, the financial result is a net cash flow(contributions minus payments), adjusted for reservation costs. Actuarial gains are calculated separately for assets and liabilities. The causes of actuarial gains are that the change in liabilities and assets during the reporting period always differs from the change that could be predicted based on the actuarial assumptions used to value them. So, for example, if the assessment assumes a rate of return on plan assets of 11% per annum, and the actual return received was 14%, then there is an actuarial profit on assets. It should be reflected in the reporting.

Past experience cost(past service cost, PSC) is the financial result of changes in the conditions of the pension plan during the reporting period. It occurs when a benefit plan is first introduced or benefits conditions change. The PSC is calculated as the additional liability arising in this case.

Companies' reporting discloses information on non-current obligations and net benefit expense for the period; the latter amount is reflected in the profit and loss account.

Long-term liabilities disclosed in the financial statements should not be confused with actuarial liabilities discussed above: these values may differ significantly. This is due to the peculiarities of recognizing actuarial gains and past service costs. If both of these quantities were recognized immediately, no difference would arise. However, these values may not be recognized immediately.

With respect to actuarial gains, IAS 19 allows for some latitude in determining the recognition policy. In particular, an entity is allowed to recognize only that part of the actuarial gain/loss that is greater than a 10% deviation from the maximum of the two values: the value of the plan assets and the value of the (actuarial) liability (the so-called “corridor rule”). The part that goes beyond the “corridor” is also not recognized immediately, its recognition is decomposed over a number of years. This rule smoothes out random fluctuations in actuarial gains/losses that can cancel each other out.

As for the cost of past service, this cost should be recognized on a straight-line basis, also over a number of years (namely, over the average period for all employees until the vesting of benefits, i.e. the moment when the right to benefits becomes inalienable) .

As a result of these features, recognized long-term liabilities are calculated as actuarial liabilities minus the cost of assets, minus the unrecognized actuarial loss and minus the unrecognized past service cost.

The calculation of benefit expense is illustrated by the following example.

Example. Calculation of the recognized benefit expense for the case where (as in the examples above) the company pays benefits out of profits, with no provisioning.

This includes, as we can see, the amounts mentioned above. Items such as the cost of interest on liabilities and the expected return on plan assets require clarification. These values are calculated by multiplying the implied rates of return by the amounts of liabilities and assets at the beginning of the period, respectively. They are part of the provisioning costs discussed above with regard to the calculation of the actuarial loss.

It is also necessary to say a few words about the substantive aspects of the actuarial valuation of liabilities.

Actuarial Valuation Specifics

As is clear from the above, the actuarial valuation of liabilities is a task that requires the use of special actuarial methods. Actuarial consulting is a specific type of activity, and the profession of an actuary has long become a separate profession that requires special knowledge and skills in a fairly significant amount. It is no coincidence that for the assessment of liabilities under IFRS, it is recommended to involve a specialist actuary (19.57). The need for this arises due to the complexity and specificity of assessment methods.

The information needed to estimate liabilities typically includes:

Documents regulating the terms of payments (Collective agreements, Regulations, etc.)
Financial information about the plan (fees, payments, asset information, etc.)
Individualized databases on employees, pensioners and changes in their composition (retirements)

The evaluation process begins with the analysis of statistical data. The actuary builds a model of staffing dynamics. For this purpose, the probabilities of so-called decrements (retirements) are estimated: layoffs, deaths, retirements. It is preferable to do this based on real enterprise statistics. If such data is not enough, then generalized models are used. So, for example, there is usually enough data to estimate the probabilities of layoffs (in this case, actuarial models are used with the probability parameterized by age or length of service). For retirements there is usually less data available and it is not always possible to build a sufficiently reliable probabilistic model. Then, for example, you can use a simplified model that uses the expected retirement age, as in the example above. There are usually very few cases of death, which forces one to use one or another standard mortality table. Typically, actuaries collect data and compile their own life tables for use in various specific areas (this typical view actuarial activities). Unfortunately, such tables have not yet begun to appear in Russia, although some steps in this direction are already being taken.

The decrement probability models formed by the actuary are part of the actuarial assumptions, or actuarial basis evaluation. Assumptions are also made about the discount rate (rate of return), wage growth rates, benefits, inflation (if necessary). Other necessary actuarial assumptions are also made. IFRS 19 governs the requirements for actuarial assumptions in sufficient detail. In particular, the Standard requires the use of "unbiased and mutually compatible" actuarial assumptions. In addition to these general requirements, IAS 19 states that the actuarial rate of return used for discounting should be consistent with the yield on long-term, high-quality corporate bonds.

Actuarial valuation of liabilities is done individually for each employee (pensioner), based on the database and using actuarial assumptions. The calculation, of course, is usually automated.

Engaging an independent consultant actuary for such an assessment has, as practice shows, a number of advantages. The consultant is a specialist and has experience in such assessments. He has a “delivered” assessment technology, and therefore can collect the necessary data and process them in the shortest possible time. Practice shows that the process of independently setting up such work in Russian companies is usually too long and laborious, is associated with errors and "alterations", and this can seriously slow down the entire reporting process. Another advantage of engaging an independent actuary is that he is able to document the results of the valuation in a detailed report and defend it to the auditor, which requires knowledge of actuarial methods and terminology and some experience in practical application IFRS 19. And, of course, in such work, Russian consultants have advantages over foreign ones, since it is much easier for them to work with Russian enterprises: there is no need to translate numerous documents, various issues are resolved much easier and faster, etc. This is also reflected in the cost of consulting: after all, the consultant lays in the cost of services all his problems, including communication ones.

Rules for accounting and disclosure of information on employee benefits in accordance with international standards financial statements are set by IAS 19 Employee Benefits. This standard was introduced on the territory of the Russian Federation by Order of the Ministry of Finance of December 28, 2015 No. 217n.

IFRS 19 applies to the accounting for all employee benefits other than those for which IFRS 2 Share-based Payments is applied.

IFRS 19: summary

Employee benefits in accordance with IFRS 19 are classified into 4 groups:

Employee Benefits Group	Examples
Short-term employee benefits expected to be paid in full before 12 months after the end of the annual reporting period in which the employees render the related service	- wages and social security contributions; - paid annual vacation and paid sick leave; - participation in profits and bonuses; - in-kind benefits (such as medical care, housing, cars, goods or services provided free of charge or at a reduced price) for existing employees
Post-employment benefits	- pension payments (for example, pensions and lump-sum payments upon retirement); - other post-employment benefits such as life insurance and post-employment health care
Other long-term employee benefits	- paid time off of a long-term nature, such as leave for seniority or sabbatical leave; - Anniversary payments or other remuneration for long service; - long-term disability benefits
Severance pay	lump sum payment in exchange for terminating the employment contract

Employee benefits include benefits provided to both employees and their dependents and beneficiaries.

For each group of employee benefits, IFRS 19 discloses the recognition and measurement of such benefits, as well as their reflection in financial statements. However, for post-employment benefits, these items are presented separately for defined contribution and defined benefit plans.

Recognition, measurement and disclosure of short-term benefits

Typical examples of short-term employee benefits are wages and social security contributions ( insurance premiums) calculated from its value.

Services that an employee provides to an entity during the reporting period should be recognized by the entity at the undiscounted amount of the short-term benefits that are expected to be paid in exchange for those services. Therefore, such awards are recognized:

as a liability (accrued expense), after deducting the amount already paid;
as an expense, except for those amounts of consideration that, in accordance with the requirements of other IFRSs, are included in the cost of the asset, i.e. .

In terms of disclosure, IAS 19 does not require specific disclosures about short-term employee benefits. However, this may be required under other IFRSs. For example, according to disclosed information on the amount of expenses for the payment of employee benefits. This amount also includes short-term rewards. And, say, IAS 24 “Related Party Disclosures” requires disclosure of information about remuneration to key management personnel.

IAS 19 establishes the rules for accounting and disclosure of information on employee benefits. IAS 19 requires an entity to recognize:

a) liability - in the case when the employee has provided a service in exchange for remuneration payable in the future;

b) expense - in the case when the company uses the economic benefit arising from the provision of a service by an employee in exchange for remuneration.

IAS 19 does not deal with pension plan reporting. Employee benefits to which IAS 19 applies include benefits that are:

a) according to formalized plans or other formalized agreements between the enterprise and its employees, groups of employees or their representatives;

b) as required by law or in connection with intra-industry agreements under which enterprises must contribute to national, state, industry or other plans jointly established by several employers; or

c) established practice that leads to an obligation arising from such practice. Established practices give rise to an associated obligation if the entity has no viable alternative to paying employee benefits. An example of a practice obligation would be a situation where a change in an enterprise's practice would result in unacceptable harm to its relationship with employees.

Employee benefits include:

a) short-term employee benefits, such as those listed below, if they are expected to be paid in full before twelve months after the end of the annual reporting period in which the employees provided the relevant services:

1) wages and social security contributions;

2) paid annual leave and paid sick leave;

3) profit sharing and premiums; And

4) benefits in kind (for example, medical care, housing, cars, goods or services provided free of charge or at a reduced price) for existing employees;

b) post-employment benefits, such as:

1) pension payments (for example, pensions and lump-sum payments upon retirement);

2) other post-employment benefits such as life insurance and post-employment health care;

c) other long-term employee benefits, such as:

1) long-term paid absences, such as seniority or sabbatical leave;

2) celebration of anniversaries or other rewards for long service; And

3) payments for long-term disability; And

d) severance pay.

Employee benefits include benefits provided to both employees and their dependents and may be made through payments (or the provision of goods or services) made either directly to employees, their spouses, children or other dependents, or to other persons such as, such as insurance companies.

An employee may provide services to an enterprise on a full-time, part-time, permanent, occasional or temporary basis. Employees include directors and other management personnel.

Employee benefits - all forms of compensation that an enterprise provides to employees in exchange for services rendered by them or the termination of an employment contract.

Short-term employee benefits – employee benefits (other than termination benefits) that are expected to be fully paid before twelve months after the end of the annual reporting period in which the employees render the related service.

Post-employment benefits – employee benefits (other than severance pay and short-term employee benefits) paid after the end of their employment.

Other long-term employee benefits – all types of employee benefits other than short-term employee benefits, post-employment benefits and termination benefits.

Severance pay – employee benefits provided in exchange for the termination of an employment contract as a result of one of two events:

a) the decision of the enterprise to terminate the employment agreement with the employee before the employee reaches retirement age, or

b) the decision of the employee to accept the offer of remuneration provided in exchange for termination of the employment contract.

Post-employment benefit plans - formalized or informal agreements, in accordance with which the enterprise pays remuneration to one or more employees at the end of their employment.

Defined Contribution Pension Plans – enterprise post-employment benefit plans under which the enterprise makes fixed contributions to a separate entity (or fund) and will not have any legal or constructive obligation to pay additional contributions if the fund’s assets are insufficient to pay employees all remuneration due for services rendered by them in the current and prior periods.

Defined Benefit Pension Plans – post-employment benefit plans other than defined contribution plans.

Pension plans jointly established by several employers, – defined contribution plans (other than public pension plans) or defined benefit plans (other than public pension plans) that:

a) combine assets contributed by different entities not under common control, and

b) use these assets to pay benefits to employees of several enterprises, provided that the contributions and the amount of payments are determined regardless of which enterprise employs the employees receiving them.

An entity must disclose information that:

(a) Explains the characteristics of its defined benefit plans and the risks associated with them;

b) identifies and explains the amounts presented in its financial statements that arise in connection with its defined benefit plans; And

c) describes how its defined benefit plans could affect the amount, timing and uncertainty of the entity's future cash flows.

The facility should consider all of the following:

a) the level of detail necessary to comply with disclosure requirements;

b) how much importance should be given to each of the various requirements;

c) the required level of aggregation or detail of information, and

d) whether users of the financial statements need additional information to evaluate the quantitative disclosures.

If the disclosures required by IAS 19 and other IFRSs are insufficient, an entity shall disclose additional information. For example, an entity may present a present value analysis of defined benefit obligations that distinguishes between the nature, characteristics and risks associated with the obligations. Such disclosures may include:

(a) Amounts due to current members, deferred benefit members and retirees;

b) remuneration, the right to receive which is unconditional, and accrued remuneration, the right to receive which is not unconditional;

c) contingent benefits, amounts attributable to future wage increases and other benefits.