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CONTENTS

COMPILATION DETAILS

COMPARISON WITH IAS 19

INTRODUCTION TO IAS 19
(available on the AASB website)

ACCOUNTING STANDARD

AASB 119 EMPLOYEE BENEFITS

Paragraphs

Objective 1

Application Aus1.1 – Aus1.5

Reduced disclosure requirements Aus1.6 – Aus1.8

Scope 2 – 7

Definitions 8

Short-term employee benefits 9 – 10

Recognition and measurement

All short-term employee benefits 11 – 12

Short-term paid absences 13 – 18

Profit-sharing and bonus plans 19 – 24

Disclosure 25

Post-employment benefits: distinction between defined contribution plans and defined benefit plans 26 – 31

Multi-employer plans 32 – 39

Defined benefit plans that share risks between entities under common control 40 – 42

State plans 43 – 45

Insured benefits 46 – 49

Post-employment benefits: defined contribution plans 50

Recognition and measurement 51 – 52

Disclosure 53 – 54

Post-employment benefits: defined benefit plans 55

Recognition and measurement 56 – 60

Accounting for the constructive obligation 61 – 62

Statement of financial position 63 – 65

Recognition and measurement: present value of defined benefit obligations and current service cost 66

Actuarial valuation method 67 – 69

Attributing benefit to periods of service 70 – 74

Actuarial assumptions 75 – 80

Actuarial assumptions: mortality 81 – 82

Actuarial assumptions: discount rate 83 – 86

Actuarial assumptions: salaries, benefits and medical costs 87 – 98

Past service cost and gains and losses on settlement 99 – 101

Past service cost 102 – 108

Gains and losses on settlement 109 – 112

Recognition and measurement: plan assets

Fair value of plan assets 113 – 115

Reimbursements 116 – 119

Components of defined benefit cost 120 – 122

Net interest on the net defined benefit liability (asset) 123 – 126

Remeasurements of the net defined benefit liability (asset) 127 – 130

Presentation

Offset 131 – 132

Current/non-current distinction 133

Components of defined benefit cost 134

Disclosure 135 – 138

Characteristics of defined benefit plans and risks associated with them 139

Explanation of amounts in the financial statements 140 – 144

Amount, timing and uncertainty of future cash flows 145 – 147

Multi-employer plans 148

Defined benefit plans that share risks between entities under common control 149 – 150

Disclosure requirements in other Australian Accounting Standards 151 – 152

Other long-term employee benefits 153 – 154

Recognition and measurement 155 – 157

Disclosure 158

Termination Benefits 159 – 164

Recognition 165 – 168

Measurement 169 – 170

Disclosure 171

Transition and Effective Date 173 – 177

Appendix:

A Application Guidance Page 35

DELETED IAS 19 TEXT Page 36

BASIS FOR CONCLUSIONS ON IAS 19
(available on the AASB website)

Australian Accounting Standard AASB 119 Employee Benefits (as amended) is set out in paragraphs 1 – 177 and Appendix A. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. AASB 119 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation of Standards, which identifies the Australian Accounting Interpretations. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.

compilation details

Accounting Standard AASB 119 Employee Benefits as amended

This compiled Standard applies to annual reporting periods beginning on or after 1 January 2016. It takes into account amendments up to and including 21 January 2015 and was prepared on 20 March 2015 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 (September 2011) as amended by other Accounting Standards, which are listed in the Table below.

Table of Standards

(a) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013.

(b) AASB 2011-8 has been amended by AASB 2011-10 (made 5 September 2011) and AASB 2012-6 (made 10 September 2012).

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013, provided that AASB 13 Fair Value Measurement is also applied to such periods.

(c) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013, provided that AASB 119 Employee Benefits (September 2011) is also applied to such periods.

(d) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013, provided that AASB 1053 Application of Tiers of Australian Accounting Standards is also applied to such periods.

(e) Entities may elect to apply Part A of this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2014.

(f) Entities may elect to apply Part B of this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2014.

(g) Entities may elect to apply Part C of this Standard to annual reporting periods beginning on or after 1 January 2014 but before 1 July 2014.

(h) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2016.

Table of Amendments

Accounting Standard AASB 119 Employee Benefits as amended

This compiled Standard applies to annual reporting periods beginning on or after 1 January 2016. It takes into account amendments up to and including 21 January 2015 and was prepared on 20 March 2015 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 (September 2011) as amended by other Accounting Standards, which are listed in the Table below.

Table of Standards

(a) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013.

(b) AASB 2011-8 has been amended by AASB 2011-10 (made 5 September 2011) and AASB 2012-6 (made 10 September 2012).

Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013, provided that AASB 13 Fair Value Measurement is also applied to such periods.

(c) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013, provided that AASB 119 Employee Benefits (September 2011) is also applied to such periods.

(d) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013, provided that AASB 1053 Application of Tiers of Australian Accounting Standards is also applied to such periods.

(e) Entities may elect to apply Part A of this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2014.

(f) Entities may elect to apply Part B of this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 July 2014.

(g) Entities may elect to apply Part C of this Standard to annual reporting periods beginning on or after 1 January 2014 but before 1 July 2014.

(h) Entities may elect to apply this Standard to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2016.

Table of Amendments

cOMPARISON WITH IAS 19

AASB 119 Employee Benefits as amended incorporates IAS 19 Employee Benefits as issued and amended by the International Accounting Standards Board (IASB). Paragraphs that have been added to this Standard (and do not appear in the text of IAS 19) are identified with the prefix “Aus” or “RDR”, followed by the number of the preceding IASB paragraph and decimal numbering. Paragraphs that apply only to not‑for‑profit entities begin by identifying their limited applicability.

Entities that comply with AASB 119 as amended will simultaneously be in compliance with IAS 19 as amended, with the exception of entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements.

aCCOUNTING STANDARD AASB 119

The Australian Accounting Standards Board made Accounting Standard AASB 119 Employee Benefits under section 334 of the Corporations Act 2001 on 5 September 2011.

This compiled version of AASB 119 applies to annual reporting periods beginning on or after 1 January 2016. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 21 January 2015 (see Compilation Details).

Objective

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

(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.

Application

Aus1.1 This Standard applies to:

(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;

(b) general purpose financial statements of each other reporting entity; and

(c) financial statements that are, or are held out to be, general purpose financial statements.

Aus1.2 This Standard applies to annual reporting periods beginning on or after 1 January 2013.
[Note: For application dates of paragraphs changed or added by an amending Standard, see Compilation Details.]

Aus1.3 This Standard may be applied to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013. When an entity applies this Standard to such an annual reporting period, it shall disclose that fact.

Aus1.4 [Deleted by the AASB]

Aus1.5 When applied or operative, this Standard supersedes AASB 119 Employee Benefits (December 2004, as amended).

Reduced disclosure requirements

Aus1.6 The following do not apply to entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements:

(a) in paragraph 25, the text “For example, AASB 124 requires disclosures about employee benefits for key management personnel. AASB 101 Presentation of Financial Statements requires disclosure of employee benefits expense.”;

(b) paragraphs 54, 135(c), 137, 139(c), 141(a)–(e), 141(h), footnote 3 to paragraph 142, 145–147, 148(d)(v) and 149–151;

(c) in paragraph 139(a), the text “, including:” and associated paragraphs (i)–(iii);

(d) in paragraph 140(b), the text “An entity shall also describe the relationship between any reimbursement right and the related obligation.”;

(e) in paragraph 141(f), the text “, showing separately those by the employer and by plan participants”;

(f) in paragraph 141(g), the text “, showing separately the amount paid in respect of any settlements”;

(g) in paragraph 142, the text “, subdividing each class … could distinguish between:” and associated paragraphs (a)–(h);

(h) in paragraph 144, the text “Such disclosure shall … relatively narrow ranges.”;

(i) in paragraph 148(d)(iv), the text “, including the basis used to determine that deficit or surplus”;

(j) in paragraph 158, the text “AASB 124 requires disclosures about employee benefits for key management personnel.”; and

(k) in paragraph 171, the text “AASB 124 requires disclosures about employee benefits for key management personnel.”

Entities applying Australian Accounting Standards – Reduced Disclosure Requirements may elect to comply with some or all of these excluded requirements.

Aus1.7 The requirements that do not apply to entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements are identified in this Standard by shading of the relevant text.

Aus1.8 The RDR paragraph in this Standard applies only to entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements.

Scope

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

3 This Standard does not deal with reporting by employee benefit plans (see AAS 25 Financial Reporting by Superannuation Plans).

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

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

(b) under legislative requirements, or through industry arrangements, whereby entities are required to contribute to national, state, industry or other multi-employer plans; or

(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.

5 Employee benefits include:

(a) short-term employee benefits, such as the following, if expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services:

(i) wages, salaries and social security contributions;

(ii) paid annual leave and paid sick leave;

(iii) profit-sharing and bonuses; and

(iv) non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees;

(b) post-employment benefits, such as the following:

(i) retirement benefits (eg pensions and lump sum payments on retirement); and

(ii) other post-employment benefits, such as post-employment life insurance and post-employment medical care;

(c) other long-term employee benefits, such as the following:

(i) long-term paid absences such as long-service leave or sabbatical leave;

(ii) jubilee or other long-service benefits; and

(iii) long-term disability benefits; and

(d) termination benefits.

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

7 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 directors and other management personnel.

Definitions

8 The following terms are used in this Standard with the meanings specified:

Definitions of employee benefits

Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment.

Short-term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service.

Post-employment benefits are employee benefits (other than termination benefits and short-term employee benefits) that are payable after the completion of employment.

Other long-term employee benefits are all employee benefits other than short-term employee benefits, post-employment benefits and termination benefits.

Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either:

(a) an entity’s decision to terminate an employee’s employment before the normal retirement date; or

(b) an employee’s decision to accept an offer of benefits in exchange for the termination of employment.

Definitions relating to classification of plans

Post-employment benefit plans are formal or informal arrangements under which an entity provides post-employment benefits for one or more employees.

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

Defined benefit plans are post-employment benefit plans other than defined contribution plans.

Multi-employer plans are defined contribution plans (other than state plans) or defined benefit plans (other than state plans) that:

(a) pool the assets contributed by various entities that are not under common control; and

(b) use those assets to provide benefits to employees of more than one entity, on the basis that contribution and benefit levels are determined without regard to the identity of the entity that employs the employees.

Definitions relating to the net defined benefit liability (asset)

The net defined benefit liability (asset) is the deficit or surplus, adjusted for any effect of limiting a net defined benefit asset to the asset ceiling.

The deficit or surplus is:

(a) the present value of the defined benefit obligation less

(b) the fair value of plan assets (if any).

The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The present value of a defined benefit obligation is the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods.

Plan assets comprise:

(a) assets held by a long-term employee benefit fund; and

(b) qualifying insurance policies.

Assets held by a long-term employee benefit fund are assets (other than non-transferable financial instruments issued by the reporting entity) that:

(a) are held by an entity (a fund) that is legally separate from the reporting entity and exists solely to pay or fund employee benefits; and

(b) are available to be used only to pay or fund employee benefits, are not available to the reporting entity’s own creditors (even in bankruptcy), and cannot be returned to the reporting entity, unless either:

(i) the remaining assets of the fund are sufficient to meet all the related employee benefit obligations of the plan or the reporting entity; or

(ii) the assets are returned to the reporting entity to reimburse it for employee benefits already paid.

A qualifying insurance policy is an insurance policy[1] issued by an insurer that is not a related party (as defined in AASB 124 Related Party Disclosures) of the reporting entity, if the proceeds of the policy:

(a) can be used only to pay or fund employee benefits under a defined benefit plan; and

(b) are not available to the reporting entity’s own creditors (even in bankruptcy) and cannot be paid to the reporting entity, unless either:

(i) the proceeds represent surplus assets that are not needed for the policy to meet all the related employee benefit obligations; or

(ii) the proceeds are returned to the reporting entity to reimburse it for employee benefits already paid.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See AASB 13 Fair Value Measurement.)

Definitions relating to defined benefit cost

Service cost comprises:

(a) current service cost, which is the increase in the present value of the defined benefit obligation resulting from employee service in the current period;

(b) past service cost, which is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan); and

(c) any gain or loss on settlement.

Net interest on the net defined benefit liability (asset) is the change during the period in the net defined benefit liability (asset) that arises from the passage of time.

Remeasurements of the net defined benefit liability (asset) comprise:

(a) actuarial gains and losses;

(b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and

(c) any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset).

Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from:

(a) experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and

(b) the effects of changes in actuarial assumptions.

The return on plan assets is interest, dividends and other income derived from the plan assets, together with realised and unrealised gains or losses on the plan assets, less:

(a) any costs of managing plan assets; and

(b) any tax payable by the plan itself, other than tax included in the actuarial assumptions used to measure the present value of the defined benefit obligation.

A settlement is a transaction that eliminates all further legal or constructive obligations for part or all of the benefits provided under a defined benefit plan, other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial assumptions.

Short-term employee benefits

9 Short-term employee benefits include items such as the following, if expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services:

(a) wages, salaries and social security contributions;

(b) paid annual leave and paid sick leave;

(c) profit-sharing and bonuses; and

(d) non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees.

10 An entity need not reclassify a short-term employee benefit if the entity’s expectations of the timing of settlement change temporarily. However, if the characteristics of the benefit change (such as a change from a non-accumulating benefit to an accumulating benefit) or if a change in expectations of the timing of settlement is not temporary, then the entity considers whether the benefit still meets the definition of short-term employee benefits.