Objective

The objective of this Standard is to prescribe the accounting and disclosure for employee benefits. The Standard requires an entity to recognise:

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(a) a liability when an employee has provided service in exchange for employee benefits to be paid in the future; and

 

(b) an expense when the entity consumes the economic benefit arising from service provided by an employee in exchange for employee benefits.

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Scope

1. This Standard shall be applied by an employer in accounting for all employee benefits, except those to which MFRS 2 Share-based Payment applies.

 

2. This Standard does not deal with reporting by employee retirement benefit plans (see MFRS 126 Accounting and Reporting by Retirement Benefit Plans). This Standard does not deal with benefits provided by composite social security programs that are not consideration in exchange for service rendered by employees or past employees of public sector entities.

 

3. The employee benefits to which this Standard applies include those provided:

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a) Under formal plans or other formal agreements between an entity and individual employees, groups of employees, or their  representatives;

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b) Under legislative requirements, or through industry arrangements, whereby entities are required to contribute to national, state, industry, or other multi-employer plans, or where entities are required to contribute to the composite social security program; or

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c) By those informal practices that give rise to a constructive obligation. Informal practices give rise to a constructive obligation where the entity has no realistic alternative but to pay employee benefits. An example of a constructive obligation is where a change in the entity’s informal practices would cause unacceptable damage to its relationship with employees.

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4. Employee benefits include:

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a) Short-term employee benefits, such as wages, salaries, and social security contributions; paid annual leave and paid sick leave; profit-sharing and bonuses (if payable within twelve months of the end of the period); and non-monetary benefits (such as medical care, housing, cars, and free subsidized goods and services) for current employees;

 

b) Post-employment benefits such as pensions, other retirement benefits, post-employment life insurance, and post-employment medical care;

 

c) Other long-term employee benefits, which may include long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are not payable wholly within twelve months after the end of the period, profit-sharing, bonuses, and deferred compensation; and

 

d) Termination benefits.

 

Due to the different characteristics of each benefit above (a)-(d), this Standard establishes separate requirements for each category.

 

5. Employee benefits include benefits provided to either employees or their dependants, and may be settled by payments (or the provision of goods and services) made either directly to the employees, their spouses, children, or other dependants, or to others, such as insurance companies.

 

6. An employee may provide services to an entity on a full-time, part-time, permanent, casual, or temporary basis. For the purpose of this Standard, employees include key management personnel as defined in MPSAS 20 Related Party Disclosures.

 

7. This Standard applies to all public sector entities other than Government Business Enterprises (GBEs). GBEs are defined in MPSAS 1, Presentation of Financial Statements.

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