Section 165 - AASB 119 - Employee Benefits - August 2015 - An entity shall recognise a liability and expense for termination benefits at the earlier of the following dates: | Zoe
165 An entity shall recognise a liability and expense for termination benefits at the earlier of the following dates:
(a) when the entity can no longer withdraw the offer of those benefits; and
(b) when the entity recognises costs for a restructuring that is within the scope of AASB 137 and involves the payment of termination benefits.
166 For termination benefits payable as a result of an employee’s decision to accept an offer of benefits in exchange for the termination of employment, the time when an entity can no longer withdraw the offer of termination benefits is the earlier of:
(a) when the employee accepts the offer; and
(b) when a restriction (eg a legal, regulatory or contractual requirement or other restriction) on the entity’s ability to withdraw the offer takes effect. This would be when the offer is made, if the restriction existed at the time of the offer.
167 For termination benefits payable as a result of an entity’s decision to terminate an employee’s employment, the entity can no longer withdraw the offer when the entity has communicated to the affected employees a plan of termination meeting all of the following criteria:
(a) Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made.
(b) The plan identifies the number of employees whose employment is to be terminated, their job classifications or functions and their locations (but the plan need not identify each individual employee) and the expected completion date.
(c) The plan establishes the termination benefits that employees will receive in sufficient detail that employees can determine the type and amount of benefits they will receive when their employment is terminated.
168 When an entity recognises termination benefits, the entity may also have to account for a plan amendment or a curtailment of other employee benefits (see paragraph 103).
Measurement
169 An entity shall measure termination benefits on initial recognition, and shall measure and recognise subsequent changes, in accordance with the nature of the employee benefit, provided that if the termination benefits are an enhancement to post-employment benefits, the entity shall apply the requirements for post-employment benefits. Otherwise:
(a) if the termination benefits are expected to be settled wholly before twelve months after the end of the annual reporting period in which the termination benefit is recognised, the entity shall apply the requirements for short-term employee benefits.
(b) if the termination benefits are not expected to be settled wholly before twelve months after the end of the annual reporting period, the entity shall apply the requirements for other long-term employee benefits.
170 Because termination benefits are not provided in exchange for service, paragraphs 70–74 relating to the attribution of the benefit to periods of service are not relevant.
Example illustrating paragraphs 159–170
BackgroundAs a result of a recent acquisition, an entity plans to close a factory in ten months and, at that time, terminate the employment of all of the remaining employees at the factory. Because the entity needs the expertise of the employees at the factory to complete some contracts, it announces a plan of termination as follows.Each employee who stays and renders service until the closure of the factory will receive on the termination date a cash payment of CU30,000. Employees leaving before closure of the factory will receive CU10,000.There are 120 employees at the factory. At the time of announcing the plan, the entity expects 20 of them to leave before closure. Therefore, the total expected cash outflows under the plan are CU3,200,000 (ie 20 × CU10,000 + 100 × CU30,000). As required by paragraph 160, the entity accounts for benefits provided in exchange for termination of employment as termination benefits and accounts for benefits provided in exchange for services as short-term employee benefits.
Termination benefitsThe benefit provided in exchange for termination of employment is CU10,000. This is the amount that an entity would have to pay for terminating the employment regardless of whether the employees stay and render service until closure of the factory or they leave before closure. Even though the employees can leave before closure, the termination of all employees’ employment is a result of the entity’s decision to close the factory and terminate their employment (ie all employees will leave employment when the factory closes). Therefore the entity recognises a liability of CU1,200,000 (ie 120 × CU10,000) for the termination benefits provided in accordance with the employee benefit plan at the earlier of when the plan of termination is announced and when the entity recognises the restructuring costs associated with the closure of the factory.
Benefits provided in exchange for serviceThe incremental benefits that employees will receive if they provide services for the full ten-month period are in exchange for services provided over that period. The entity accounts for them as short-term employee benefits because the entity expects to settle them before twelve months after the end of the annual reporting period. In this example, discounting is not required, so an expense of CU200,000 (ie CU2,000,000 ÷ 10) is recognised in each month during the service period of ten months, with a corresponding increase in the carrying amount of the liability.
171 Although this Standard does not require specific disclosures about termination benefits, other Australian Accounting Standards may require disclosures. For example, AASB 124 requires disclosures about employee benefits for key management personnel. AASB 101 requires disclosure of employee benefits expense.
Transition and effective date
172 An entity shall apply this Standard for annual periods beginning on or after 1 January 2016. Earlier application is permitted for periods beginning on or after 1 January 2014 but before 1 January 2016. If an entity applies this Standard for an earlier period, it shall disclose that fact.
Aus172.1 Paragraphs 173(a) and (b) shall not be applied by an entity that has previously applied AASB 119, unless required to do so by another Standard.
173 An entity shall apply this Standard retrospectively, in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, except that:
(a) an entity need not adjust the carrying amount of assets outside the scope of this Standard for changes in employee benefit costs that were included in the carrying amount before the date of initial application. The date of initial application is the beginning of the earliest prior period presented in the first financial statements in which the entity adopts this Standard.
(b) in financial statements for periods beginning before 1 January 2014, an entity need not present comparative information for the disclosures required by paragraph 145 about the sensitivity of the defined benefit obligation.
174 \[Deleted by the AASB\]
175 AASB 2014-1 Amendments to Australian Accounting Standards, issued in June 2014, amended paragraphs 93–94 in the previous version of this Standard. An entity shall apply those amendments for annual periods beginning on or after 1 July 2014 retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.
176 AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012–2014 Cycle, issued in January 2015, amended the previous version of this Standard as follows: amended paragraph 83 and added paragraph 177. An entity shall apply that amendment for annual periods beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies that amendment for an earlier period it shall disclose that fact.
177 An entity shall apply the amendment in paragraph 176 from the beginning of the earliest comparative period presented in the first financial statements in which the entity applies the amendment. Any initial adjustment arising from the application of the amendment shall be recognised in retained earnings at the beginning of that period.
178 AASB 17, issued in July 2017, amended the footnote to paragraph 8. An entity shall apply that amendment when it applies AASB 17.
179 AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendment, Curtailment or Settlement, issued in March 2018, added paragraphs 101A, 122A and 123A, and amended paragraphs 57, 99, 120, 123, 125, 126 and 156. An entity shall apply these amendments to plan amendments, curtailments or settlements occurring on or after the beginning of the first annual reporting period that begins on or after 1 January 2019. Earlier application is permitted. If an entity applies these amendments earlier, it shall disclose that fact
Commencement of the legislative instrument
Aus177.1 [Repealed]
Withdrawal of AASB pronouncements
Aus177.2 This Standard repeals AASB 119 Employee Benefits issued in September 2011. Despite the repeal, after the time this Standard starts to apply under section 334 of the Corporations Act (either generally or in relation to an individual entity), the repealed Standard continues to apply in relation to any period ending before that time as if the repeal had not occurred.
\[Note: When this Standard applies under section 334 of the Corporations Act (either generally or in relation to an individual entity), it supersedes the application of the repealed Standard.\]
Appendix A
Application guidance
This appendix is an integral part of the Standard. It describes the application of paragraphs 92–93 and has the same authority as the other parts of the Standard.
A1 The accounting requirements for contributions from employees or third parties are illustrated in the diagram below.
Appendix C
Australian simplified disclosures for Tier 2 entities
Note: This appendix is an integral part of the Standard.
AusC1 Paragraphs 25, 33(b), 34(b), 42, 53, 54, 135–152, 158 and 171 do not apply to entities preparing general purpose financial statements that apply AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.
Compilation details
Accounting Standard AASB 119 Employee Benefits (as amended)
Note: Compilation details are not part of AASB 119.
This compiled Standard applies to annual periods beginning on or after 1 January 2023 but before 1 July 2026. It takes into account amendments up to and including 15 December 2022 and was prepared on 6 April 2023 by the staff of the Australian Accounting Standards Board (AASB).
This compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 119 (August 2015) as amended by other Accounting Standards, which are listed in the table below.
Table of Standards
Standard
Date made
FRL identifier
Commence-ment date
Effective date(annual periods… on or after …)
Application, saving or transitional provisions
AASB 119
7 Aug 2015
F2015L01612
31 Dec 2015
(beginning) 1 Jan 2016
see (a) below
AASB 17
19 Jul 2017
F2017L01184
31 Dec 2022
(beginning) 1 Jan 2023
see (b) below
AASB 2018-2
23 Mar 2018
F2018L00460
31 Dec 2018
(beginning) 1 Jan 2019
see (c) below
AASB 2019-1
21 May 2019
F2019L00966
31 Dec 2019
(beginning) 1 Jan 2020
see (d) below
AASB 1060
6 Mar 2020
F2020L00288
30 Jun 2021
(beginning) 1 Jul 2021
see (e) below
AASB 2021-7
20 Dec 2021
F2021L01883
31 Dec 2021
(beginning) 1 Jan 2022
see (f) below
AASB 2022-8
15 Dec 2022
F2023L00014
31 Dec 2022
(beginning) 1 Jan 2023
see (g) below
AASB 2022-9
15 Dec 2022
F2023L00015
30 Jun 2026
(beginning) 1 Jul 2026
not compiled*
* The amendments made by this Standard are not included in this compilation, which presents the principal Standard as applicable to annual periods beginning on or after 1 January 2023 but before 1 July 2026.
(a) Entities may elect to apply this Standard to periods beginning on or after 1 January 2014 but before 1 January 2016.
(b) Entities may elect to apply this Standard to annual periods beginning before 1 January 2023, provided that AASB 9 Financial Instruments is also applied on or before the date of initial application of AASB 17. (AASB 17 was amended prior to its mandatory application by various amending Standards, including AASB 2022-8 Amendments to Australian Accounting Standards – Insurance Contracts: Consequential Amendments, made by the AASB on 15 December 2022.)
(c) Entities may elect to apply this Standard to annual periods beginning before 1 January 2019.
(d) Entities may elect to apply this Standard to annual periods beginning before 1 January 2020.
(e) Entities may elect to apply this Standard to annual periods beginning before 1 July 2021.
(f) Entities may elect to apply this Standard to annual periods beginning before 1 January 2022.
(g) Entities may elect to apply this Standard to annual periods beginning before 1 January 2023.
Table of amendments
Paragraph affected
How affected
By … [paragraph/page]
AusCF1
added
AASB 2019-1 [page 20]
3
amended
AASB 2021-7 [32]
8
amendedamended
AASB 17 [page 77]AASB 2022-8 [page 10]
57
amended
AASB 2018-2 [page 5]
99
amended
AASB 2018-2 [page 6]
101A
added
AASB 2018-2 [page 6]
120
amended
AASB 2018-2 [page 6]
122A (and heading)
added
AASB 2018-2 [page 6]
123
amended
AASB 2018-2 [page 6]
123A
added
AASB 2018-2 [page 6]
125
amended
AASB 2018-2 [page 6]
126
amended
AASB 2018-2 [page 7]
156
amended
AASB 2018-2 [page 7]
Aus177.1
repealed
Legislation Act 2003, s. 48D
178
added
AASB 17 [page 77]
179
added
AASB 2018-2 [page 7]
Appendix C
replaced
AASB 1060 [page 62]
Deleted IAS 19 text
Note: Deleted IAS 19 text is not part of AASB 119.
174 IFRS 13, issued in May 2011, amended the definition of fair value in paragraph 8 and amended paragraph 113. An entity shall apply those amendments when it applies IFRS 13.
[1] A qualifying insurance policy is not necessarily an insurance contract, as defined in AASB 17 Insurance Contracts.
Aus1 For public sector entities, a qualifying insurance policy is not necessarily an insurance contract, as defined in AASB 4 Insurance Contracts.