Employee Retirement Appreciation

							 AS-15( REVISED 2005)
EMPLOYEE’S BENEFITS



      PRESENTED By :-
      Dr. RAJ. K. AGARWAL
      FCA,FCS,AICWA,LLB, Phd.
    RAKESH RAJ & ASSOCIATES
                     AS-15
      (Revised 2005 – Employee’s Benefit)
                 BASIC PRINCIPLE
 -Recognize the expenses of benefit to employees
  during their service Period, which may be paid.

Currently,
On Retirement, or
Post Retirement
    AS-15 (REVISED 2005- EMPLOYEE’S
               BENEFITS)
APPLICABILITY
With effect from accounting period commencing on or after
1.04.2006
Level I Enterprises                  -in entirety
Other than level I Enterprises      - para 11 to 16, 46
having 50 or more employees            and 139 not applicable
                                       para 50 to 116 limited
                                       applicability
less than 50 employees                  - do –
                                       instead of actuarial
                                       valuation, some other
                                        method may be used.
    AS-15(Revised 2005-Employees Benefits)

• SCOPE
  -It Covers all employee Benefits as per –
      Formal agreement
      Legislative requirement
      Informal practice


  -It does not cover
      Profit Sharing Plans &
      Employee benefit Plans e.g., ESOP
         AS 15(Revised 2005- Employee’s Benefit)
• NATURE OF BENEFITS
 -Short term employees Benefits:
 (payable within 12 months after providing Services)

                               Salaries
                                      - Wages,

                      - Leave Compensation
                      - Bonus
                      - Non Monetary Benefits
-Post Employment Benefits :
                      - Gratuity
                      - Pension/Superannuation
                      - Provident Fund
        AS 15(Revised 2005- Employee’s Benefit)

- Other long term Employee Benefits:

( Payable after 12 months of providing service)

                                           - Long Service Leaves
                                           - Bonuses
                                           - Deferred Compensation

- Termination Benefits : Compensations and other benefits
                         on termination or pre mature
                         retirement.
      AS 15(Revised 2005- Employee’s Benefit)
Short Term Employee Benefits
• Salaries, wages and other non-monetary Benefits:
                     - To Account for in Current Period
                    - Not To Discount

• Leaves :      Fully Encashable - Full Provision
                Lapsing          - No Provision
                Accumulating      - Provision for
                                    Expected Liabilities

• Bonus         : May be contingent upon future service
     AS 15(Revised 2005- Employee’s Benefit)
Post Employment Benefits

• Defined Contribution Plans

• Defined Benefit Plans
      AS 15(Revised 2005- Employee’s Benefit)

• Defined Contribution Plans

- Liability of Enterprise       : Periodic Contribution
                                  e.g. Provident Fund.

- On Retirement Employee gets : Accumulated
                                Contribution and
                                Appreciation of Fund.
     AS 15(Revised 2005- Employee’s Benefit)

• Defined Benefit Plans –
• Benefit on Retirement or Post Retirement
    - Expense to be provided during service period of
     the employee.
           Liability for Expense:
  Unfunded               Funded
                                - State Fund
                                - Trust Fund
                                - Insurance Fund
                                - Mutual Fund
                                ( To Create Plan Asset)
     AS 15(Revised 2005- Employee’s Benefit)


Group Gratuity Scheme of Insurers

• Whether Defined Contribution Plan ?

• Whether it provides insurance cover?
                    Or
• It is only a plan Asset ?
     AS 15(Revised 2005- Employee’s Benefit)



• Non Vesting Benefits also to be provided :
  e.g. Gratuity payable after completion of five
  year of service but to be provided from Ist
  Year
AS 15(Revised 2005- Employee’s Benefit)
Defined Benefit Plans
• Estimation of liability of Benefits
                        : Using Actuarial assumptions

• Discounting to Determine present Value (A)
                     : Using Projected Unit credit
                       Method.
• Determine Fair Value of Plan Assets (B)

 Difference of A-B to be carried in Balance Sheet as
AS 15(Revised 2005- Employee’s Benefit)
• Defined Benefit Plans
  Expenses to be provided in P&l Account to
  Constitute :
  - Current Service Cost
  - Interest Cost
  - Expected Return on plan asset
  - Actuarial gain or losses
  - Past Service Cost
  - Effect of any curtailment or settlement
      AS 15(Revised 2005- Employee’s Benefit)
 Actuarial Assumptions

• Demographic   - Mortality
                - Employee Turnover

• Financial     - Future Salary increase
                - Discount rate
                - Return on plan asset
                - Medical Treatment Cost
                - Change in cost of Medical Services

     Discount rate to be as per return on Government
      AS 15(Revised 2005- Employee’s Benefit)
        Special Features of Revised AS-15

• Disclosure of Different Components of cost to be
  charged to P& L Account.
• Disclosure and break up of actuarial assumptions.
• Discounting Rates as per yield on Government Bonds.
• Actuarial Assumptions may be reviewed by
  Management/ Auditors.
• Benefit Obligations and plan asset to be separately
  disclosed.
• Management of plan assets is separately reflected.
     AS 15(Revised 2005- Employee’s Benefit)
                    Disclosures
• Nature of Defined Benefit plans and effect of
  changes if any.
• Break up and reconciliation of different components
  of defined benefit obligation.
• Break up and reconciliation of different components
  or plan assets and return on assets.
• Expenses recognized in P& L Account in different
  components.
• Main Actuarial assumptions used.
     AS 15(Revised 2005- Employee’s Benefit)
• Termination Benefits:

 - To be Accounted for expenses immediately.

 - VRS is a termination benefit.

 - In case of VRS transitional provisions.
      AS 15(Revised 2005- Employee’s Benefit)

• Transitional provisions:
  - Liability to be recognized as per revised
    AS-15 as on 01-04-2006, to be adjusted
    against revenue reserves.

   - Liability as per pre-revised AS- 15 shall be
     prior period expense.

   - VRS up to 31-03-2010 : After that in the year
     of incurrence.
T H A N K   Y O U