PERSONAL FINANCE

Personal Finance

Personal Finance

Introduction

An increasing number of companies and other entities now offer a pension and other benefits in addition to salaries and wages as part of the package of their employee's remuneration. When a company or other entity employs a new worker, that employee will be offered a package of pay and benefits. Some of these would be short-term and the employee will receive the benefit at about the same time as he or she earns it, for example basic pay, overtime etc. Other employee benefits are deferred; however, the main example is of retirement benefits or pension. Several employers give post-employment benefits to their employees after they cease to work or retire.

Discussion

The scenario which has been presented is of the instance of an employee benefit system. The International Accounting Standards (IAS) provides a comprehensive insight, in how the system needs to be designed and functioned. Therefore, it is imperative that IAS 19 is thoroughly comprehended, so that an effective financial plan can be chalked out for our client.

IAS 19 Employee Benefits details the accounting requirements for employee benefits, which includes benefits for short-term, for example salary and wage. It also includes post-employment benefits like benefits upon retirement and other cancellation benefits of long-term nature (IAS, 2013). The standard declares that the costs arsing out of benefits provision should be recognised in the term in which the benefit is gained by the worker, instead of when it falls due for payment, and determines how each kind of employee benefits would be measured, with an in-depth guidance particularly about post-employment benefits. It is important that we understand, the different categories of employee benefits mentioned in IAS 19 (IAS, 2013):

Employee benefits are all the kinds of remunerations a company provides in return for services provided by employees.

Employee benefits of short-term in nature are those benefits which become eligible within a year and after the end of this term in which employee serves (IAS, 2013).

Post-Employment are benefits for employees(apart from cancellation benefits) which are due for payment after the expiry of term.

Post-employment benefit plans are an incentive in which a company offers post-employment benefits for its employees (IFRS, 2013).

Defined contributions plan are the benefits due after being employed in which an entity has a set contribution into a fund and it has no lawful or productive obligation to pay more contributions if the funds has not enough assets for payment of all benefits of employees in relation to employee service in the current or previous period.

Defined benefit plans are those benefits plans that are provided apart from defined contribution plans.

Multi-Employer plan provides two functions:

It gathers the assets provided by different entities that are not under a unitary control.

Use of the assets to provide relief to workers of more than one company, on the grounds that payment and gain levels are determined without reference to the entity's identification that employs the concerned workers.

Other Long term employee benefits are those benefits which do not stand eligible within a year and after the end ...