Difference between Ind AS 19 on Employees Benefits, and existing AS 15 (revised 2005) on Employees Benefits

(i) In Ind AS 19 employee benefits arising from constructive obligations are also covered whereas the existing AS 15 does not deal with the same. (Paragraph 3(c) of Ind AS 19)

(ii) As per the existing standard, the term employee includes wholetime directors whereas under Ind AS 19 the term includes directors. (Paragraph 6 of Ind AS 19)

(iii) Definitions of short-term employee benefits, other long-term employee benefits, return on plan assets and past service cost as per the existing AS 15 have been changed in Ind AS 19. (Paragraph 7 of Ind AS 19)

(iv) Ind AS 19 deals with situations where there is a contractual agreement between a multi-employer plan and its participants that determines how the surplus in the plan will be distributed to the participants (or the deficit funded). (Paragraph 32A of Ind AS 19) The existing AS 15 does not deal with it.

(v) As per Ind AS 19, participation in a defined benefit plan sharing risks between various entities under common control is a related party transaction for each group entity and some disclosures are required in the separate or individual financial statements of an entity whereas the existing AS 15 does not contain similar provisions. (Paragraph 34 B of Ind AS 19).

(vi) Cross-reference to recognition of, or disclosure of information, of contingent liabilities under the Standard on Provisions, Contingent Liabilities, Contingent Assets, in the case of multi-employer plans, appearing in the existing standard has been amended in Ind AS 19 as disclosure only, since, contingent liabilities should not be recognised as per the Standard on Provisions, Contingent Liabilities, Contingent Assets. (Paragraph 32 B of Ind AS 19)

(vii) Ind AS 19 encourages, but does not require, an entity to involve a qualified actuary in the measurement of all material post employment benefit obligations whereas the existing standard, though does not require involvement of a qualified actuary, does not specifically encourage the same. (Paragraph 57 of Ind AS 19)

(viii) In the existing AS 15, in respect of defined benefit plans, one of the limits for ‘asset ceiling’ comprises present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. In the revised standard, on the other hand, the said limit is the total of (i)any cumulative unrecognised past service cost and (ii) the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. (Paragraph 58(b) of Ind AS 19).

(ix) Ind AS 19 makes it clear that financial assumptions shall be based on market expectations, at the end of the reporting period, for the period over which the obligations are to be settled whereas the existing standard does not clarify the same. (Paragraph 77 of Ind AS 19)

(x) Ind AS 19contains the following clarifications which are not there in the existing standard:

(a) negative past service cost arises when an entity changes the benefits attributable to past service so that the present value of the defined benefit obligation decreases. (Paragraph 97 of Ind AS 19)

(b) a curtailment may arise from a reduction in the extent to which future salary increases are linked to the benefits payable for past service. (Paragraph 111 of Ind AS 19)

(c) when a plan amendment reduces benefits, only the effect of the reduction for future service is a curtailment and that the effect of any reduction for past service is a negative past service cost. (Paragraph 111 A of Ind AS 19)

Further, with reference to curtailments, as against the requirement of ‘present obligation’ in the existing standard, the revised standard requires ‘demonstrable commitment in respect of reduction in the number of employees’. Also, the terms ‘material reduction in the number of employees’ and ’material element of future service’ appearing in the existing standard have been replaced by the terms ‘significant reduction in the number of employees’ and ’significant element of future service’ respectively in Ind AS 19. (Paragraph 111 of Ind AS 19)

(xi) Under Ind AS 19, more guidance has been given for timing of recognition of termination benefits. Recognition criteria for termination benefits under the revised standard differ from the criteria prescribed in the existing standard. Measurement criteria have also been expanded in the revised standard to deal with voluntary redundancy. (Paragraphs 133, 134 and 140 of Ind AS 19).

(xii) Ind AS 19 requires recognition of the actuarial gains and losses in other comprehensive income, both for post-employment defined benefit plans and other long-term employment benefit plans. The actuarial gains and losses recognised in other comprehensive income should be recognised immediately in retained earnings and should not be reclassified to profit or loss in a subsequent period. Existing AS 15 requires recognition of the actuarial gains and losses immediately in the statement of profit and loss as income or expense

(xiii) Ind AS 19 gives guidance on the interaction of ceiling of asset recognition and minimum funding requirement in the case of defined benefit obligations, whereas this guidance is not available in the existing standard.(Appendix A of Ind AS 19). (ICAI)