TYPES OF EMPLOYEE BENEFIT
Post employment benefits or retirement benefits for example defined contribution plan or a defined benefit plan (defined benefit scheme)
Short term employee benefits: - wages, salaries, bonuses and other benefits
Termination benefits:- when benefits become payable on the termination of the employment contract.
Other long term employee benefits:- long service leaveor awards, long term disability benefits, long service benefits.
POST EMPLOYMENT BENEFIT PLANS
A pension plan called a post employment benefit plan or scheme consists of pool of assets together with a liability for pensions owed to employees. Personal plan assets normally consist of investments, cash and properties and the return earned on the assets is used to pay pensions.
There are two main types of pension plan
DEFINED CONTRIBUTION PLAN
The pension payable on retirement depends on the contributions paid into the plan by the employer and employee.
The employers contribution is usually qa fixed percentage of the employee’s salary.The employer has no further obligation after the amount is paid.
The employee bears the uncertainity regarding the value of the pension that will be paid upon retirement.
Expense of providing pensions in the period are normally the same as the amount of contributions paid.
An asset or a liability for pensions only arises if the cash paid doesnot equal the value of the contributions due for the period.
Ias 19 requires disclosures of the amount recognised as an expense in the period.
DEFINED BENEFIT PLAN
Entity recognises both the liability for the future pension payments together with the plan assets.
If the liability exceeds the assets, there is a plan deficit and a liability is reported in the SOFP
If the plan assets exceed the liability there is a surplus and an asset is reported in the SOFP.
STATEMENT OF TOTAL COMPREHENSIVE INCOME
SERVICE COST COMPONENT current and past service cost, gains and...