EMPLOYEE BENEFITS

The objective of employee benefit accounting is the appropriate determination of periodic cost. International Accounting Standards 19 identifies and provides accounting direction for four categories of employee benefits: short-term benefits such as wages, bonuses and emoluments such as medical care; post-employment benefits such as pensions and other post-retirement benefits; other long term benefits such as sabbatical leave; and termination benefits. The establishment of a pension plan represents a long-term financial commitment to employees. Although some entities manage their own plans, this commitment usually takes the form of contributions that are made to an independent trustee or, in some countries, to a governmental agency. Past service costs arise when a plan is amended retroactively, so that additional attribution for benefits is given to services rendered in past years. The expense related to past service cost is recognised in income when the related plan amendment, curtailment or settlement occurs.