832
Indian Accounting Standard (Ind AS) 19
Employee Benefits 
(This Indian Accounting Standard includes paragraphs set in bold type and plain type, which 
have equal authority. Paragraphs in bold type indicate the main principles.)
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.
Scope
2 This Standard shall be applied by an employer in accounting for all employee benefits, except 
those to which Ind AS 102, Share-based Payment, applies.
3 This Standard does not deal with reporting by employee benefit 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;
833
(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 postemployment 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 shortterm employee benefits) that are payable after the completion of employment.
834
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.
835
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*
issued by an insurer that is not a related 
party (as defined in Ind AS 24, 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 Ind AS 113, Fair Value Measurement.)
 
* A qualifying insurance policy is not necessarily an insurance contract, as defined in Ind AS 104, Insurance 
Contracts.
836
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.
837
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.
Recognition and measurement
All short-term employee benefits
11 When an employee has rendered service to an entity during an accounting period, the entity 
shall recognise the undiscounted amount of short-term employee benefits expected to be paid 
in exchange for that service:
(a) as a liability (accrued expense), after deducting any amount already paid. If the amount 
already paid exceeds the undiscounted amount of the benefits, an entity shall recognise 
that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for
example, a reduction in future payments or a cash refund.
(b) as an expense, unless another Ind AS requires or permits the inclusion of the benefits in 
the cost of an asset (see, for example, Ind AS 2, Inventories, and Ind AS 16, Property, Plant 
and Equipment).
12 Paragraphs 13, 16 and 19 explain how an entity shall apply paragraph 11 to short-term 
employee benefits in the form of paid absences and profit-sharing and bonus plans.
Short-term paid absences
13 An entity shall recognise the expected cost of short-term employee benefits in the form of paid 
absences under paragraph 11 as follows:
838
(a) in the case of accumulating paid absences, when the employees render service that 
increases their entitlement to future paid absences.
(b) in the case of non-accumulating paid absences, when the absences occur.
14 An entity may pay employees for absence for various reasons including holidays, sickness and shortterm disability, maternity or paternity, jury service and military service. Entitlement to paid absences 
falls into two categories:
(a) accumulating; and
(b) non-accumulating.
15 Accumulating paid absences are those that are carried forward and can be used in future periods if 
the current period’s entitlement is not used in full. Accumulating paid absences may be either 
vesting (in other words, employees are entitled to a cash payment for unused entitlement on leaving 
the entity) or non-vesting (when employees are not entitled to a cash payment for unused entitlement 
on leaving). An obligation arises as employees render service that increases their entitlement to 
future paid absences. The obligation exists, and is recognised, even if the paid absences are nonvesting, although the possibility that employees may leave before they use an accumulated nonvesting entitlement affects the measurement of that obligation.
16 An entity shall measure the expected cost of accumulating paid absences as the additional 
amount that the entity expects to pay as a result of the unused entitlement that has 
accumulated at the end of the reporting period.
17 The method specified in the previous paragraph measures the obligation at the amount of the 
additional payments that are expected to arise solely from the fact that the benefit accumulates. In 
many cases, an entity may not need to make detailed computations to estimate that there is no
material obligation for unused paid absences. For example, a sick leave obligation is likely to be 
material only if there is a formal or informal understanding that unused paid sick leave may be taken 
as paid annual leave.
Example illustrating paragraphs 16 and 17
An entity has 100 employees, who are each entitled to five working days of paid sick leave for 
each year. Unused sick leave may be carried forward for one calendar year. Sick leave is taken 
first out of the current year’s entitlement and then out of any balance brought forward from the 
previous year (a LIFO basis). At 31 December 20X1 the average unused entitlement is two days 
per employee. The entity expects, on the basis of experience that is expected to continue, that 92 
employees will take no more than five days of paid sick leave in 20X2 and that the remaining 
eight employees will take an average of six and a half days each. 
The entity expects that it will pay an additional twelve days of sick pay as a result of the unused 
entitlement that has accumulated at 31 December 20X1 (one and a half days each, for eight 
employees). Therefore, the entity recognises a liability equal to twelve days of sick pay.
839
18 Non-accumulating paid absences do not carry forward: they lapse if the current period’s entitlement is 
not used in full and do not entitle employees to a cash payment for unused entitlement on leaving the 
entity. This is commonly the case for sick pay (to the extent that unused past entitlement does not 
increase future entitlement), maternity or paternity leave and paid absences for jury service or 
military service. An entity recognises no liability or expense until the time of the absence, because 
employee service does not increase the amount of the benefit. 
Profit-sharing and bonus plans
19 An entity shall recognise the expected cost of profit-sharing and bonus payments under 
paragraph 11 when, and only when:
(a) the entity has a present legal or constructive obligation to make such payments as a result 
of past events; and
(b) a reliable estimate of the obligation can be made.
A present obligation exists when, and only when, the entity has no realistic alternative but to 
make the payments.
20 Under some profit-sharing plans, employees receive a share of the profit only if they remain with the 
entity for a specified period. Such plans create a constructive obligation as employees render service 
that increases the amount to be paid if they remain in service until the end of the specified period. 
The measurement of such constructive obligations reflects the possibility that some employees may 
leave without receiving profit-sharing payments.
Example illustrating paragraph 20
A profit-sharing plan requires an entity to pay a specified proportion of its profit for the year to 
employees who serve throughout the year. If no employees leave during the year, the total profitsharing payments for the year will be 3 per cent of profit. The entity estimates that staff turnover 
will reduce the payments to 2.5 per cent of profit. 
The entity recognises a liability and an expense of 2.5 per cent of profit.
21 An entity may have no legal obligation to pay a bonus. Nevertheless, in some cases, an entity has a 
practice of paying bonuses. In such cases, the entity has a constructive obligation because the entity 
has no realistic alternative but to pay the bonus. The measurement of the constructive obligation 
reflects the possibility that some employees may leave without receiving a bonus.
22 An entity can make a reliable estimate of its legal or constructive obligation under a profit- sharing 
or bonus plan when, and only when:
(a) the formal terms of the plan contain a formula for determining the amount of the benefit;
840
(b) the entity determines the amounts to be paid before the financial statements are approved for 
issue; or
(c) past practice gives clear evidence of the amount of the entity’s constructive obligation.
23 An obligation under profit-sharing and bonus plans results from employee service and not from a 
transaction with the entity’s owners. Therefore, an entity recognises the cost of profit-sharing and 
bonus plans not as a distribution of profit but as an expense.
24 If profit-sharing and bonus payments are not expected to be settled wholly before twelve months 
after the end of the annual reporting period in which the employees render the related service, those 
payments are other long-term employee benefits (see paragraphs 153–158).
Disclosure
25 Although this Standard does not require specific disclosures about short-term employee benefits, 
other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee 
benefits for key management personnel. Ind AS 1, Presentation of Financial Statements, requires 
disclosure of employee benefits expense.
Post-employment benefits: distinction between defined contribution 
plans and defined benefit plans
26 Post-employment benefits include items such as the following:
(a) retirement benefits (eg pensions and lump sum payments on retirement); and
(b) other post-employment benefits, such as post-employment life insurance and post-employment 
medical care.
Arrangements whereby an entity provides post-employment benefits are post-employment benefit 
plans. An entity applies this Standard to all such arrangements whether or not they involve the 
establishment of a separate entity to receive contributions and to pay benefits.
27 Post-employment benefit plans are classified as either defined contribution plans or defined benefit 
plans, depending on the economic substance of the plan as derived from its principal terms and 
conditions.
28 Under defined contribution plans the entity’s legal or constructive obligation is limited to the amount 
that it agrees to contribute to the fund. Thus, the amount of the post-employment benefits received 
by the employee is determined by the amount of contributions paid by an entity (and perhaps also 
the employee) to a post-employment benefit plan or to an insurance company, together with 
investment returns arising from the contributions. In consequence, actuarial risk (that benefits will be
less than expected) and investment risk (that assets invested will be insufficient to meet expected 
benefits) fall, in substance, on the employee.
841
29 Examples of cases where an entity’s obligation is not limited to the amount that it agrees to 
contribute to the fund are when the entity has a legal or constructive obligation through:
(a) a plan benefit formula that is not linked solely to the amount of contributions and requires the 
entity to provide further contributions if assets are insufficient to meet the benefits in the plan 
benefit formula;
(b) a guarantee, either indirectly through a plan or directly, of a specified return on contributions; 
or
(c) those informal practices that give rise to a constructive obligation. For example, a constructive 
obligation may arise where an entity has a history of increasing benefits for former employees 
to keep pace with inflation even where there is no legal obligation to do so.
30 Under defined benefit plans:
(a) the entity’s obligation is to provide the agreed benefits to current and former employees; and
(b) actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, 
on the entity. If actuarial or investment experience are worse than expected, the entity’s 
obligation may be increased.
31 Paragraphs 32–49 explain the distinction between defined contribution plans and defined benefit 
plans in the context of multi-employer plans, defined benefit plans that share risks between entities 
under common control, state plans and insured benefits.
Multi-employer plans
32 An entity shall classify a multi-employer plan as a defined contribution plan or a defined 
benefit plan under the terms of the plan (including any constructive obligation that goes 
beyond the formal terms).
33 If an entity participates in a multi-employer defined benefit plan, unless paragraph 34 applies, 
it shall:
(a) account for its proportionate share of the defined benefit obligation, plan assets and cost 
associated with the plan in the same way as for any other defined benefit plan; and
(b) disclose the information required by paragraphs 135–148 (excluding paragraph 148(d)).
34 When sufficient information is not available to use defined benefit accounting for a multiemployer defined benefit plan, an entity shall:
(a) account for the plan in accordance with paragraphs 51 and 52 as if it were a defined 
contribution plan; and
(b) disclose the information required by paragraph 148.
842
35 One example of a multi-employer defined benefit plan is one where:
(a) the plan is financed on a pay-as-you-go basis: contributions are set at a level that is expected to 
be sufficient to pay the benefits falling due in the same period; and future benefits earned
during the current period will be paid out of future contributions; and
(b) employees’ benefits are determined by the length of their service and the participating entities 
have no realistic means of withdrawing from the plan without paying a contribution for the 
benefits earned by employees up to the date of withdrawal. Such a plan creates actuarial risk for 
the entity: if the ultimate cost of benefits already earned at the end of the reporting period is 
more than expected, the entity will have either to increase its contributions or to persuade 
employees to accept a reduction in benefits. Therefore, such a plan is a defined benefit plan.
36 Where sufficient information is available about a multi-employer defined benefit plan, an entity 
accounts for its proportionate share of the defined benefit obligation, plan assets and postemployment cost associated with the plan in the same way as for any other defined benefit plan. 
However, an entity may not be able to identify its share of the underlying financial position and 
performance of the plan with sufficient reliability for accounting purposes. This may occur if:
(a) the plan exposes the participating entities to actuarial risks associated with the current and 
former employees of other entities, with the result that there is no consistent and reliable basis 
for allocating the obligation, plan assets and cost to individual entities participating in the plan; 
or
(b) the entity does not have access to sufficient information about the plan to satisfy the 
requirements of this Standard.
In those cases, an entity accounts for the plan as if it were a defined contribution plan and discloses 
the information required by paragraph 148.
37 There may be a contractual agreement between the multi-employer plan and its participants that 
determines how the surplus in the plan will be distributed to the participants (or the deficit funded). 
A participant in a multi-employer plan with such an agreement that accounts for the plan as a 
defined contribution plan in accordance with paragraph 34 shall recognise the asset or liability that 
arises from the contractual agreement and the resulting income or expense in profit or loss.
Example illustrating paragraph 37 
An entity participates in a multi-employer defined benefit plan that does not prepare plan 
valuations on an Ind AS 19 basis. It therefore accounts for the plan as if it were a defined 
contribution plan. A non-Ind AS 19 funding valuation shows a deficit of Rs.100 million in the 
plan. The plan has agreed under contract a schedule of contributions with the participating 
employers in the plan that will eliminate the deficit over the next five years. The entity’s total 
contributions under the contract are Rs.8 million. 
The entity recognises a liability for the contributions adjusted for the time value of money and an 
equal expense in profit or loss.
843
38 Multi-employer plans are distinct from group administration plans. A group administration plan is 
merely an aggregation of single employer plans combined to allow participating employers to pool 
their assets for investment purposes and reduce investment management and administration costs, 
but the claims of different employers are segregated for the sole benefit of their own employees. 
Group administration plans pose no particular accounting problems because information is readily 
available to treat them in the same way as any other single employer plan and because such plans do 
not expose the participating entities to actuarial risks associated with the current and former 
employees of other entities. The definitions in this Standard require an entity to classify a group 
administration plan as a defined contribution plan or a defined benefit plan in accordance with the 
terms of the plan (including any constructive obligation that goes beyond the formal terms). *
39 In determining when to recognise, and how to measure, a liability relating to the wind-up of a 
multi-employer defined benefit plan, or the entity’s withdrawal from a multi-employer defined 
benefit plan, an entity shall apply Ind AS 37, Provisions, Contingent Liabilities and Contingent 
Assets. 
Defined benefit plans that share risks between entities under common 
control
40 Defined benefit plans that share risks between entities under common control, for example, a parent 
and its subsidiaries, are not multi-employer plans.
41 An entity participating in such a plan shall obtain information about the plan as a whole measured in 
accordance with this Standard on the basis of assumptions that apply to the plan as a whole. If there 
is a contractual agreement or stated policy for charging to individual group entities the net defined 
benefit cost for the plan as a whole measured in accordance with this Standard, the entity shall, in its 
separate or individual financial statements, recognise the net defined benefit cost so charged. If there 
is no such agreement or policy, the net defined benefit cost shall be recognised in the separate or 
individual financial statements of the group entity that is legally the sponsoring employer for the 
plan. The other group entities shall, in their separate or individual financial statements, recognise a 
cost equal to their contribution payable for the period.
42 Participation in such a plan is a related party transaction for each individual group entity. An entity 
shall therefore, in its separate or individual financial statements, disclose the information required by 
paragraph 149.
State plans
43 An entity shall account for a state plan in the same way as for a multi-employer plan (see 
paragraphs 32–39).
44 State plans are established by legislation to cover all entities (or all entities in a particular category, 
for example, a specific industry) and are operated by national or local government or by another 
body (for example, an autonomous agency created specifically for this purpose) that is not subject to 
control or influence by the reporting entity. Some plans established by an entity provide both 
compulsory benefits, as a substitute for benefits that would otherwise be covered under a state plan, 
and additional voluntary benefits. Such plans are not state plans.
45 State plans are characterised as defined benefit or defined contribution, depending on the entity’s 
obligation under the plan. Many state plans are funded on a pay-as-you-go basis: contributions are 
844
set at a level that is expected to be sufficient to pay the required benefits falling due in the same 
period; future benefits earned during the current period will be paid out of future contributions. 
Nevertheless, in most state plans the entity has no legal or constructive obligation to pay those future 
benefits: its only obligation is to pay the contributions as they fall due and if the entity ceases to 
employ members of the state plan, it will have no obligation to pay the benefits earned by its own 
employees in previous years. For this reason, state plans are normally defined contribution plans. 
However, when a state plan is a defined benefit plan an entity applies paragraphs 32–39.
Insured benefits
46 An entity may pay insurance premiums to fund a post-employment benefit plan. The entity 
shall treat such a plan as a defined contribution plan unless the entity will have (either directly, 
or indirectly through the plan) a legal or constructive obligation either:
(a) to pay the employee benefits directly when they fall due; or
(b) to pay further amounts if the insurer does not pay all future employee benefits relating to 
employee service in the current and prior periods.
If the entity retains such a legal or constructive obligation, the entity shall treat the plan as a 
defined benefit plan.
47 The benefits insured by an insurance policy need not have a direct or automatic relationship with the 
entity’s obligation for employee benefits. Post-employment benefit plans involving insurance 
policies are subject to the same distinction between accounting and funding as other funded plans.
48 Where an entity funds a post-employment benefit obligation by contributing to an insurance policy 
under which the entity (either directly, indirectly through the plan, through the mechanism for setting
future premiums or through a related party relationship with the insurer) retains a legal or 
constructive obligation, the payment of the premiums does not amount to a defined contribution 
arrangement. It follows that the entity:
(a) accounts for a qualifying insurance policy as a plan asset (see paragraph 8); and
(b) recognises other insurance policies as reimbursement rights (if the policies satisfy the criterion 
in paragraph 116).
49 Where an insurance policy is in the name of a specified plan participant or a group of plan 
participants and the entity does not have any legal or constructive obligation to cover any loss on the 
policy, the entity has no obligation to pay benefits to the employees and the insurer has sole
responsibility for paying the benefits. The payment of fixed premiums under such contracts is, in 
substance, the settlement of the employee benefit obligation, rather than an investment to meet the 
obligation. Consequently, the entity no longer has an asset or a liability. Therefore, an entity treats 
such payments as contributions to a defined contribution plan.
Post-employment benefits: defined contribution plans
50 Accounting for defined contribution plans is straightforward because the reporting entity’s obligation 
for each period is determined by the amounts to be contributed for that period. Consequently, no 
845
actuarial assumptions are required to measure the obligation or the expense and there is no 
possibility of any actuarial gain or loss. Moreover, the obligations are measured on an undiscounted 
basis, except where they are not expected to be settled wholly before twelve months after the end of 
the annual reporting period in which the employees render the related service.
Recognition and measurement
51 When an employee has rendered service to an entity during a period, the entity shall recognise 
the contribution payable to a defined contribution plan in exchange for that service:
(a) as a liability (accrued expense), after deducting any contribution already paid. If the 
contribution already paid exceeds the contribution due for service before the end of the 
reporting period, an entity shall recognise that excess as an asset (prepaid expense) to the 
extent that the prepayment will lead to, for example, a reduction in future payments or a 
cash refund.
(b) as an expense, unless another Ind AS requires or permits the inclusion of the contribution 
in the cost of an asset (see, for example, Ind AS 2 and Ind AS 16).
52 When contributions to a defined contribution plan are not expected to be settled wholly before 
twelve months after the end of the annual reporting period in which the employees render the 
related service, they shall be discounted using the discount rate specified in paragraph 83.
Disclosure
53 An entity shall disclose the amount recognised as an expense for defined contribution plans.
54 Where required by Ind AS 24 an entity discloses information about contributions to defined 
contribution plans for key management personnel.
Post-employment benefits: defined benefit plans
55 Accounting for defined benefit plans is complex because actuarial assumptions are required to 
measure the obligation and the expense and there is a possibility of actuarial gains and losses. 
Moreover, the obligations are measured on a discounted basis because they may be settled many 
years after the employees render the related service.
Recognition and measurement
56 Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by 
an entity, and sometimes its employees, into an entity, or fund, that is legally separate from the 
reporting entity and from which the employee benefits are paid. The payment of funded benefits 
when they fall due depends not only on the financial position and the investment performance of the 
fund but also on an entity’s ability, and willingness, to make good any shortfall in the fund’s assets.
Therefore, the entity is, in substance, underwriting the actuarial and investment risks associated with 
the plan. Consequently, the expense recognised for a defined benefit plan is not necessarily the 
amount of the contribution due for the period.
846
57 Accounting by an entity for defined benefit plans involves the following steps:
(a) determining the deficit or surplus. This involves:
(i) using an actuarial technique, the projected unit credit method, to make a reliable estimate 
of the ultimate cost to the entity of the benefit that employees have earned in return for 
their service in the current and prior periods (see paragraphs 67–69). This requires an 
entity to determine how much benefit is attributable to the current and prior periods (see 
paragraphs 70–74) and to make estimates (actuarial assumptions) about demographic 
variables (such as employee turnover and mortality) and financial variables (such as 
future increases in salaries and medical costs) that will affect the cost of the benefit (see 
paragraphs 75–98).
(ii) discounting that benefit in order to determine the present value of the defined benefit 
obligation and the current service cost (see paragraphs 67–69 and 83–86).
(iii) deducting the fair value of any plan assets (see paragraphs 113–115) from the present 
value of the defined benefit obligation.
(b) determining the amount of the net defined benefit liability (asset) as the amount of the deficit or 
surplus determined in (a), adjusted for any effect of limiting a net defined benefit asset to the 
asset ceiling (see paragraph 64).
(c) determining amounts to be recognised in profit or loss:
(i) current service cost (see paragraphs 70–74).
(ii) any past service cost and gain or loss on settlement (see paragraphs 99–112).
(iii) net interest on the net defined benefit liability (asset) (see paragraphs 123–126).
(d) determining the remeasurements of the net defined benefit liability (asset), to be recognised in 
other comprehensive income, comprising:
(i) actuarial gains and losses (see paragraphs 128 and 129);
(ii) return on plan assets, excluding amounts included in net interest on the net defined 
benefit liability (asset) (see paragraph 130); and
(iii) any change in the effect of the asset ceiling (see paragraph 64), excluding amounts 
included in net interest on the net defined benefit liability (asset).
Where an entity has more than one defined benefit plan, the entity applies these procedures for 
each material plan separately.
58 An entity shall determine the net defined benefit liability (asset) with sufficient regularity that 
the amounts recognised in the financial statements do not differ materially from the amounts 
that would be determined at the end of the reporting period.
59 This Standard encourages, but does not require, an entity to involve a qualified actuary in the 
measurement of all material post-employment benefit obligations. For practical reasons, an entity 
may request a qualified actuary to carry out a detailed valuation of the obligation before the end of 
847
the reporting period. Nevertheless, the results of that valuation are updated for any material 
transactions and other material changes in circumstances (including changes in market prices and
interest rates) up to the end of the reporting period.
60 In some cases, estimates, averages and computational short cuts may provide a reliable 
approximation of the detailed computations illustrated in this Standard.
Accounting for the constructive obligation
61 An entity shall account not only for its legal obligation under the formal terms of a defined 
benefit plan, but also for any constructive obligation that arises from the entity’s informal 
practices. 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.
62 The formal terms of a defined benefit plan may permit an entity to terminate its obligation under the 
plan. Nevertheless, it is usually difficult for an entity to terminate its obligation under a plan (without
payment) if employees are to be retained. Therefore, in the absence of evidence to the contrary, 
accounting for post-employment benefits assumes that an entity that is currently promising such 
benefits will continue to do so over the remaining working lives of employees.
Balance Sheet
63 An entity shall recognise the net defined benefit liability (asset) in the balance sheet.
64 When an entity has a surplus in a defined benefit plan, it shall measure the net defined benefit 
asset at the lower of:
(a) the surplus in the defined benefit plan; and
(b) the asset ceiling, determined using the discount rate specified in paragraph 83.
65 A net defined benefit asset may arise where a defined benefit plan has been overfunded or where
actuarial gains have arisen. An entity recognises a net defined benefit asset in such cases because:
(a) the entity controls a resource, which is the ability to use the surplus to generate future benefits;
(b) that control is a result of past events (contributions paid by the entity and service rendered by 
the employee); and
(c) future economic benefits are available to the entity in the form of a reduction in future 
contributions or a cash refund, either directly to the entity or indirectly to another plan in 
deficit. The asset ceiling is the present value of those future benefits.
848
 Recognition and measurement: present value of defined benefit obligations 
and current service cost
66 The ultimate cost of a defined benefit plan may be influenced by many variables, such as final 
salaries, employee turnover and mortality, employee contributions and medical cost trends. The 
ultimate cost of the plan is uncertain and this uncertainty is likely to persist over a long period of 
time. In order to measure the present value of the post-employment benefit obligations and the 
related current service cost, it is necessary:
(a) to apply an actuarial valuation method (see paragraphs 67–69);
(b) to attribute benefit to periods of service (see paragraphs 70–74); and
(c) to make actuarial assumptions (see paragraphs 75–98).
Actuarial valuation method
67 An entity shall use the projected unit credit method to determine the present value of its 
defined benefit obligations and the related current service cost and, where applicable, past 
service cost.
68 The projected unit credit method (sometimes known as the accrued benefit method pro-rated on 
service or as the benefit/years of service method) sees each period of service as giving rise to an 
additional unit of benefit entitlement (see paragraphs 70–74) and measures each unit separately to 
build up the final obligation (see paragraphs 75–98).
Example illustrating paragraph 68
A lump sum benefit is payable on termination of service and equal to 1 per cent of final salary for 
each year of service. The salary in year 1 is Rs.10,000 and is assumed to increase at 7 per cent 
(compound) each year. The discount rate used is 10 per cent per year. The following table shows 
how the obligation builds up for an employee who is expected to leave at the end of year 5, 
assuming that there are no changes in actuarial assumptions. For simplicity, this example ignores 
the additional adjustment needed to reflect the probability that the employee may leave the entity 
at an earlier or later date. 
Year 1 2 3 4 5
 Rs. Rs. Rs. Rs. Rs. 
 
Benefit attributed to:
– prior years 0 131 262 393 524
– current year 131 131 131 131 131
(1% of final salary)
– current 131 262 393 524 655
849
and prior years
Opening – 89 196 324 476
Obligation
Interest at 10% – 9 20 33 48
Current 89 98 108 119 131
service cost
Closing 89 196 324 476 655
Obligation
Note:
1. The opening obligation is the present value of the benefit attributed to prior years.
2. The current service cost is the present value of the benefit attributed to the current year.
3. The closing obligation is the present value of the benefit attributed to current and prior 
years.
69 An entity discounts the whole of a post-employment benefit obligation, even if part of the obligation 
is expected to be settled before twelve months after the reporting period.
Attributing benefit to periods of service
70 In determining the present value of its defined benefit obligations and the related current 
service cost and, where applicable, past service cost, an entity shall attribute benefit to periods 
of service under the plan’s benefit formula. However, if an employee’s service in later years 
will lead to a materially higher level of benefit than in earlier years, an entity shall attribute 
benefit on a straight-line basis from:
(a) the date when service by the employee first leads to benefits under the plan (whether or 
not the benefits are conditional on further service) until
(b) the date when further service by the employee will lead to no material amount of further 
benefits under the plan, other than from further salary increases.
71 The projected unit credit method requires an entity to attribute benefit to the current period (in order 
to determine current service cost) and the current and prior periods (in order to determine the present 
value of defined benefit obligations). An entity attributes benefit to periods in which the obligation 
to provide post-employment benefits arises. That obligation arises as employees render services in 
return for post-employment benefits that an entity expects to pay in future reporting periods. 
850
Actuarial techniques allow an entity to measure that obligation with sufficient reliability to justify 
recognition of a liability.
Examples illustrating paragraph 71
1. A defined benefit plan provides a lump sum benefit of Rs.100 payable on retirement for each 
year of service.
A benefit of Rs.100 is attributed to each year. The current service cost is the present value of 
Rs.100. The present value of the defined benefit obligation is the present value of Rs.100, 
multiplied by the number of years of service up to the end of the reporting period.
If the benefit is payable immediately when the employee leaves the entity, the current service 
cost and the present value of the defined benefit obligation reflect the date at which the 
employee is expected to leave. Thus, because of the effect of discounting, they are less than the 
amounts that would be determined if the employee left at the end of the reporting period.
2. A plan provides a monthly pension of 0.2 per cent of final salary for each year of service. The 
pension is payable from the age of 65. 
 Benefit equal to the present value, at the expected retirement date, of a monthly pension of 0.2 
per cent of the estimated final salary payable from the expected retirement date until the 
expected date of death is attributed to each year of service. The current service cost is the 
present value of that benefit. The present value of the defined benefit obligation is the present 
value of monthly pension payments of 0.2 per cent of final salary, multiplied by the number of 
years of service up to the end of the reporting period. The current service cost and the present 
value of the defined benefit obligation are discounted because pension payments begin at the 
age of 65.
72 Employee service gives rise to an obligation under a defined benefit plan even if the benefits are 
conditional on future employment (in other words they are not vested). Employee service before the 
vesting date gives rise to a constructive obligation because, at the end of each successive reporting 
period, the amount of future service that an employee will have to render before becoming entitled to 
the benefit is reduced. In measuring its defined benefit obligation, an entity considers the probability 
that some employees may not satisfy any vesting requirements. Similarly, although some postemployment benefits, for example, post-employment medical benefits, become payable only if a
specified event occurs when an employee is no longer employed, an obligation is created when the 
employee renders service that will provide entitlement to the benefit if the specified event occurs. 
The probability that the specified event will occur affects the measurement of the obligation, but 
does not determine whether the obligation exists.
Examples illustrating paragraph 72
851
1. A plan pays a benefit of Rs.100 for each year of service. The benefits vest after ten years of 
service.
A benefit of Rs.100 is attributed to each year. In each of the first ten years, the current service 
cost and the present value of the obligation reflect the probability that the employee may not 
complete ten years of service.
2. A plan pays a benefit of Rs.100 for each year of service, excluding service before the age of 
25. The benefits vest immediately.
No benefit is attributed to service before the age of 25 because service before that date does 
not lead to benefits (conditional or unconditional). A benefit of Rs.100 is attributed to each 
subsequent year.
73 The obligation increases until the date when further service by the employee will lead to no material 
amount of further benefits. Therefore, all benefit is attributed to periods ending on or before that 
date. Benefit is attributed to individual accounting periods under the plan’s benefit formula. 
However, if an employee’s service in later years will lead to a materially higher level of benefit than 
in earlier years, an entity attributes benefit on a straight-line basis until the date when further service 
by the employee will lead to no material amount of further benefits. That is because the employee’s 
service throughout the entire period will ultimately lead to benefit at that higher level.
Examples illustrating paragraph 73
1. A plan pays a lump sum benefit of Rs.1,000 that vests after ten years of service. The plan provides no 
further benefit for subsequent service.
A benefit of Rs.100 (Rs.1,000 divided by ten) is attributed to each of the first ten years.
The current service cost in each of the first ten years reflects the probability that the employee may not 
complete ten years of service. No benefit is attributed to subsequent years.
2. A plan pays a lump sum retirement benefit of Rs.2,000 to all employees who are still employed at the 
age of 55 after twenty years of service, or who are still employed at the age of 65, regardless of their 
length of service.
For employees who join before the age of 35, service first leads to benefits under the plan at the age of 
35 (an employee could leave at the age of 30 and return at the age of 33, with no effect on the amount or 
timing of benefits). Those benefits are conditional on further service. Also, service beyond the age of 55 
will lead to no material amount of further benefits. For these employees, the entity attributes benefit of 
Rs.100 (Rs.2,000 divided by twenty) to each year from the age of 35 to the age of 55.
For employees who join between the ages of 35 and 45, service beyond twenty years will lead to no 
material amount of further benefits. For these employees, the entity attributes benefit of 100 (2,000 
divided by twenty) to each of the first twenty years.
For an employee who joins at the age of 55, service beyond ten years will lead to no material amount of 
852
further benefits. For this employee, the entity attributes benefit of Rs.200 (Rs.2,000 divided by ten) to 
each of the first ten years.
For all employees, the current service cost and the present value of the obligation reflect the 
probability that the employee may not complete the necessary period of service.
3. A post-employment medical plan reimburses 40 per cent of an employee’s post-employment medical 
costs if the employee leaves after more than ten and less than twenty years of service and 50 per cent of 
those costs if the employee leaves after twenty or more years of service.
Under the plan’s benefit formula, the entity attributes 4 per cent of the present value of the expected 
medical costs (40 per cent divided by ten) to each of the first ten years and 1 per cent (10 per cent 
divided by ten) to each of the second ten years. The current service cost in each year reflects the
probability that the employee may not complete the necessary period of service to earn part or all of the
benefits. For employees expected to leave within ten years, no benefit is attributed.
 
4. A post-employment medical plan reimburses 10 per cent of an employee’s post- employment medical 
costs if the employee leaves after more than ten and less than twenty years of service and 50 per cent of 
those costs if the employee leaves after twenty or more years of service.
Service in later years will lead to a materially higher level of benefit than in earlier years. Therefore, 
for employees expected to leave after twenty or more years, the entity attributes benefit on a straightline basis under paragraph 71. Service beyond twenty years will lead to no material amount of further 
benefits. Therefore, the benefit attributed to each of the first twenty years is 2.5 per cent of the present 
value of the expected medical costs (50 per cent divided by twenty).
For employees expected to leave between ten and twenty years, the benefit attributed to each of the first 
ten years is 1 per cent of the present value of the expected medical costs.
For these employees, no benefit is attributed to service between the end of the tenth year and the 
estimated date of leaving.
For employees expected to leave within ten years, no benefit is attributed.
5. An entity has 1,000 employees. As per the statutory requirements, gratuity shall be payable to an 
employee on the termination of his employment after he has rendered continuous service for not less 
than five years (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or 
disablement due to accident or disease. The completion of continuous service of five years shall not be 
necessary where the termination of the employment of any employee is due to death or disablement. 
The amount payable is determined by a formula linked to number of years of service and last drawn 
salary. As per the law, the amount payable shall not exceed Rs.1,000,000.
The amount of gratuity attributed to each year of service will be calculated as follows:
Number of employees not likely to fulfil the eligibility criteria will be ignored.
Other employees will be grouped according to period of service they are expected to render taking into 
account mortality rate, disablement and resignation after 5 years. Gratuity payable will be calculated 
in accordance with the formula prescribed in the governing statute based on the period of service and 
the salary at the time of termination of employment, assuming promotion, salary increases etc. 
853
For those employees for whom the amount payable as per the formula does not exceed Rs.1,000,000, 
over the expected period of service, the amount payable will be divided by the expected period of 
service and the resulting amount will be attributed to each year of the expected period of service, 
including the period before the stipulated period of 5 years.
In case of the remaining employees, the amount as per the formula exceeds Rs. 1,000,000 over the 
expected period of service of 10 years, and the amount of the statutory threshold of Rs. 1,000,000 is 
reached at the end of 8 years. Rs. 1,25,000 (Rs. 1,000,000 divided by 8) is attributed to each of the 
first 8 years. In this case, no benefit is attributed to subsequent two years. This is because service 
beyond 8 years will lead to no material amount of further benefits
74 Where the amount of a benefit is a constant proportion of final salary for each year of service, future 
salary increases will affect the amount required to settle the obligation that exists for service before 
the end of the reporting period, but do not create an additional obligation. Therefore:
(a) for the purpose of paragraph 70(b), salary increases do not lead to further benefits, even though 
the amount of the benefits is dependent on final salary; and
(b) the amount of benefit attributed to each period is a constant proportion of the salary to which 
the benefit is linked.
Example illustrating paragraph 74
Employees are entitled to a benefit of 3 per cent of final salary for each year of service before the 
age of 55. 
Benefit of 3 per cent of estimated final salary is attributed to each year up to the age of 55. This is 
the date when further service by the employee will lead to no material amount of further benefits 
under the plan. No benefit is attributed to service after that age.
Actuarial assumptions
75 Actuarial assumptions shall be unbiased and mutually compatible.
76 Actuarial assumptions are an entity’s best estimates of the variables that will determine the ultimate
cost of providing post-employment benefits. Actuarial assumptions comprise:
(a) demographic assumptions about the future characteristics of current and former employees 
(and their dependants) who are eligible for benefits. Demographic assumptions deal with 
matters such as:
(i) mortality (see paragraphs 81 and 82);
(ii) rates of employee turnover, disability and early retirement;
(iii) the proportion of plan members with dependants who will be eligible for benefits;
854
(iv) the proportion of plan members who will select each form of payment option available 
under the plan terms; and
(v) claim rates under medical plans.
(b) financial assumptions, dealing with items such as: 
(i) the discount rate (see paragraphs 83–86);
(ii) benefit levels, excluding any cost of the benefits to be met by employees, and future 
salary (see paragraphs 87–95);
(iii) in the case of medical benefits, future medical costs, including claim handling costs (ie 
the costs that will be incurred in processing and resolving claims, including legal and 
adjuster’s fees) (see paragraphs 96–98); and
(iv) taxes payable by the plan on contributions relating to service before the reporting date or 
on benefits resulting from that service.
77 Actuarial assumptions are unbiased if they are neither imprudent nor excessively conservative.
78 Actuarial assumptions are mutually compatible if they reflect the economic relationships between 
factors such as inflation, rates of salary increase and discount rates. For example, all assumptions 
that depend on a particular inflation level (such as assumptions about interest rates and salary and 
benefit increases) in any given future period assume the same inflation level in that period.
79 An entity determines the discount rate and other financial assumptions in nominal (stated) terms, 
unless estimates in real (inflation-adjusted) terms are more reliable, for example, in a 
hyperinflationary economy (see Ind AS 29, Financial Reporting in Hyperinflationary Economies), 
or where the benefit is index-linked and there is a deep market in index-linked bonds of the same 
currency and term.
80 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.
Actuarial assumptions: mortality
81 An entity shall determine its mortality assumptions by reference to its best estimate of the 
mortality of plan members both during and after employment.
82 In order to estimate the ultimate cost of the benefit an entity takes into consideration expected 
changes in mortality, for example by modifying standard mortality tables with estimates of mortality 
improvements.
 Actuarial assumptions: discount rate
83 The rate used to discount post-employment benefit obligations (both funded and unfunded) 
shall be determined by reference to market yields at the end of the reporting period on 
government bonds. However, subsidiaries, associates, joint ventures and branches domiciled 
outside India shall discount post-employment benefit obligations arising on account of post-
855
employment benefit plans using the rate determined by reference to market yields at the end of 
the reporting period on high quality corporate bonds. In case, such subsidiaries, associates,
joint ventures and branches are domiciled in countries where there is no deep market in such 
bonds, the market yields (at the end of the reporting period) on government bonds of that 
country shall be used. The currency and term of the government bonds or corporate bonds 
shall be consistent with the currency and estimated term of the post-employment benefit 
obligations.
84 One actuarial assumption that has a material effect is the discount rate. The discount rate reflects the 
time value of money but not the actuarial or investment risk. Furthermore, the discount rate does not 
reflect the entity-specific credit risk borne by the entity’s creditors, nor does it reflect the risk that 
future experience may differ from actuarial assumptions.
85 The discount rate reflects the estimated timing of benefit payments. In practice, an entity often 
achieves this by applying a single weighted average discount rate that reflects the estimated timing 
and amount of benefit payments and the currency in which the benefits are to be paid.
86 In some cases, there may be no deep market in government bonds with a sufficiently long maturity to 
match the estimated maturity of all the benefit payments. In such cases, an entity uses current market 
rates of the appropriate term to discount shorter-term payments, and estimates the discount rate for 
longer maturities by extrapolating current market rates along the yield curve. The total present value 
of a defined benefit obligation is unlikely to be particularly sensitive to the discount rate applied to 
the portion of benefits that is payable beyond the final maturity of the available government bonds.
Actuarial assumptions: salaries, benefits and medical costs
87 An entity shall measure its defined benefit obligations on a basis that reflects:
(a) the benefits set out in the terms of the plan (or resulting from any constructive obligation 
that goes beyond those terms) at the end of the reporting period;
(b) any estimated future salary increases that affect the benefits payable;
(c) the effect of any limit on the employer’s share of the cost of the future benefits;
(d) contributions from employees or third parties that reduce the ultimate cost to the entity of 
those benefits; and
(e) estimated future changes in the level of any state benefits that affect the benefits payable 
under a defined benefit plan, if, and only if, either:
(i) those changes were enacted before the end of the reporting period; or
(ii) historical data, or other reliable evidence, indicate that those state benefits will 
change in some predictable manner, for example, in line with future changes in 
general price levels or general salary levels.
88 Actuarial assumptions reflect future benefit changes that are set out in the formal terms of a plan (or 
a constructive obligation that goes beyond those terms) at the end of the reporting period. This is the 
case if, for example:
856
(a) the entity has a history of increasing benefits, for example, to mitigate the effects of inflation, 
and there is no indication that this practice will change in the future;
(b) the entity is obliged, by either the formal terms of a plan (or a constructive obligation that goes 
beyond those terms) or legislation, to use any surplus in the plan for the benefit of plan 
participants (see paragraph 108(c)); or
(c) benefits vary in response to a performance target or other criteria. For example, the terms of the 
plan may state that it will pay reduced benefits or require additional contributions from
employees if the plan assets are insufficient. The measurement of the obligation reflects the 
best estimate of the effect of the performance target or other criteria.
89 Actuarial assumptions do not reflect future benefit changes that are not set out in the formal terms of 
the plan (or a constructive obligation) at the end of the reporting period. Such changes will result in:
(a) past service cost, to the extent that they change benefits for service before the change; and
(b) current service cost for periods after the change, to the extent that they change benefits for 
service after the change.
90 Estimates of future salary increases take account of inflation, seniority, promotion and other relevant 
factors, such as supply and demand in the employment market. 
91 Some defined benefit plans limit the contributions that an entity is required to pay. The ultimate cost 
of the benefits takes account of the effect of a limit on contributions. The effect of a limit on 
contributions is determined over the shorter of:
(a) the estimated life of the entity; and
(b) the estimated life of the plan.
92 Some defined benefit plans require employees or third parties to contribute to the cost of the plan. 
Contributions by employees reduce the cost of the benefits to the entity. An entity considers whether 
third-party contributions reduce the cost of the benefits to the entity, or are a reimbursement right as 
described in paragraph 116. Contributions by employees or third parties are either set out in the 
formal terms of the plan (or arise from a constructive obligation that goes beyond those terms), or 
are discretionary. Discretionary contributions by employees or third parties reduce service cost upon 
payment of these contributions to the plan.
93 Contributions from employees or third parties set out in the formal terms of the plan either reduce 
service cost (if they are linked to service), or affect remeasurements of the net defined benefit 
liability (asset) (if they are not linked to service). An example of contributions that are not 
linked to service is when the contributions are required to reduce a deficit arising from losses on 
plan assets or from actuarial losses. If contributions from employees or third parties are linked to
service, those contributions reduce the service cost as follows: 
(a) if the amount of the contributions is dependent on the number of years of service, an 
entity shall attribute the contributions to periods of service using the same attribution 
857
method required by paragraph 70 for the gross benefit (ie either using the plan’s 
contribution formula or on a straight-line basis); or
(b) if the amount of the contributions is independent of the number of years of service, the 
entity is permitted to recognise such contributions as a reduction of the service cost in 
the period in which the related service is rendered. Examples of contributions that are 
independent of the number of years of service include those that are a fixed percentage 
of the employee’s salary, a fixed amount throughout the service period or dependent 
on the employee’s age.
 Appendix A provides related application guidance.
94 For contributions from employees or third parties that are attributed to periods of service in 
accordance with paragraph 93(a), changes in the contributions result in:
(a) current and past service cost (if those changes are not set out in the formal terms of a plan and 
do not arise from a constructive obligation); or
(b) actuarial gains and losses (if those changes s are set out in the formal terms of a plan, or arise 
from a constructive obligation).
95 Some post-employment benefits are linked to variables such as the level of state retirement benefits 
or state medical care. The measurement of such benefits reflects the best estimate of such variables, 
based on historical data and other reliable evidence.
96 Assumptions about medical costs shall take account of estimated future changes in the cost of 
medical services, resulting from both inflation and specific changes in medical costs.
97 Measurement of post-employment medical benefits requires assumptions about the level and 
frequency of future claims and the cost of meeting those claims. An entity estimates future medical 
costs on the basis of historical data about the entity’s own experience, supplemented where 
necessary by historical data from other entities, insurance companies, medical providers or other 
sources. Estimates of future medical costs consider the effect of technological advances, changes in 
health care utilisation or delivery patterns and changes in the health status of plan participants.
98 The level and frequency of claims is particularly sensitive to the age, health status and sex of 
employees (and their dependants) and may be sensitive to other factors such as geographical 
location. Therefore, historical data are adjusted to the extent that the demographic mix of the
population differs from that of the population used as a basis for the data. They are also adjusted 
where there is reliable evidence that historical trends will not continue.
Past service cost and gains and losses on settlement
99 Before determining past service cost, or a gain or loss on settlement, an entity shall remeasure 
the net defined benefit liability (asset) using the current fair value of plan assets and current 
actuarial assumptions (including current market interest rates and other current market 
858
prices) reflecting the benefits offered under the plan before the plan amendment, curtailment 
or settlement.
100 An entity need not distinguish between past service cost resulting from a plan amendment, past 
service cost resulting from a curtailment and a gain or loss on settlement if these transactions occur 
together. In some cases, a plan amendment occurs before a settlement, such as when an entity
changes the benefits under the plan and settles the amended benefits later. In those cases an entity 
recognises past service cost before any gain or loss on settlement.
101 A settlement occurs together with a plan amendment and curtailment if a plan is terminated with the 
result that the obligation is settled and the plan ceases to exist. However, the termination of a plan is 
not a settlement if the plan is replaced by a new plan that offers benefits that are, in substance, the 
same. 
Past service cost
102 Past service cost is the change in the present value of the defined benefit obligation resulting from a 
plan amendment or curtailment.
103 An entity shall recognise past service cost as an expense at the earlier of the following dates:
(a) when the plan amendment or curtailment occurs; and
(b) when the entity recognises related restructuring costs (see Ind AS 37) or termination 
benefits (see paragraph 165).
104 A plan amendment occurs when an entity introduces, or withdraws, a defined benefit plan or changes 
the benefits payable under an existing defined benefit plan.
105 A curtailment occurs when an entity significantly reduces the number of employees covered by a 
plan. A curtailment may arise from an isolated event, such as the closing of a plant, discontinuance 
of an operation or termination or suspension of a plan.
106 Past service cost may be either positive (when benefits are introduced or changed so that the present 
value of the defined benefit obligation increases) or negative (when benefits are withdrawn or 
changed so that the present value of the defined benefit obligation decreases).
107 Where an entity reduces benefits payable under an existing defined benefit plan and, at the same 
time, increases other benefits payable under the plan for the same employees, the entity treats the 
change as a single net change.
108 Past service cost excludes:
(a) the effect of differences between actual and previously assumed salary increases on the 
obligation to pay benefits for service in prior years (there is no past service cost because 
actuarial assumptions allow for projected salaries);
(b) underestimates and overestimates of discretionary pension increases when an entity has a 
constructive obligation to grant such increases (there is no past service cost because actuarial
assumptions allow for such increases);
859
(c) estimates of benefit improvements that result from actuarial gains or from the return on plan 
assets that have been recognised in the financial statements if the entity is obliged, by either the 
formal terms of a plan (or a constructive obligation that goes beyond those terms) or legislation, 
to use any surplus in the plan for the benefit of plan participants, even if the benefit increase has 
not yet been formally awarded (there is no past service cost because the resulting increase in the 
obligation is an actuarial loss, see paragraph 88); and
(d) the increase in vested benefits (ie benefits that are not conditional on future employment, see 
paragraph 72) when, in the absence of new or improved benefits, employees complete vesting
requirements (there is no past service cost because the entity recognised the estimated cost of 
benefits as current service cost as the service was rendered).
Gains and losses on settlement
109 The gain or loss on a settlement is the difference between:
(a) the present value of the defined benefit obligation being settled, as determined on the date of 
settlement; and
(b) the settlement price, including any plan assets transferred and any payments made directly by 
the entity in connection with the settlement.
110 An entity shall recognise a gain or loss on the settlement of a defined benefit plan when the 
settlement occurs.
111 A settlement occurs when an entity enters into a transaction that eliminates all further legal or 
constructive obligation 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 in accordance with the terms of the plan 
and included in the actuarial assumptions). For example, a one-off transfer of significant employer 
obligations under the plan to an insurance company through the purchase of an insurance policy is a 
settlement; a lump sum cash payment, under the terms of the plan, to plan participants in exchange 
for their rights to receive specified post-employment benefits is not.
112 In some cases, an entity acquires an insurance policy to fund some or all of the employee benefits 
relating to employee service in the current and prior periods. The acquisition of such a policy is not a 
settlement if the entity retains a legal or constructive obligation (see paragraph 46) to pay further 
amounts if the insurer does not pay the employee benefits specified in the insurance policy. 
Paragraphs 116–119 deal with the recognition and measurement of reimbursement rights under 
insurance policies that are not plan assets.
Recognition and measurement: plan assets
Fair value of plan assets
113 The fair value of any plan assets is deducted from the present value of the defined benefit obligation 
in determining the deficit or surplus. 
114 Plan assets exclude unpaid contributions due from the reporting entity to the fund, as well as any 
non-transferable financial instruments issued by the entity and held by the fund. Plan assets are 
860
reduced by any liabilities of the fund that do not relate to employee benefits, for example, trade and 
other payables and liabilities resulting from derivative financial instruments.
115 Where plan assets include qualifying insurance policies that exactly match the amount and timing of 
some or all of the benefits payable under the plan, the fair value of those insurance policies is 
deemed to be the present value of the related obligations (subject to any reduction required if the 
amounts receivable under the insurance policies are not recoverable in full).
Reimbursements
116 When, and only when, it is virtually certain that another party will reimburse some or all of the 
expenditure required to settle a defined benefit obligation, an entity shall:
(a) recognise its right to reimbursement as a separate asset. The entity shall measure the asset 
at fair value.
(b) disaggregate and recognise changes in the fair value of its right to reimbursement in the 
same way as for changes in the fair value of plan assets (see paragraphs 124 and 125).The 
components of defined benefit cost recognised in accordance with paragraph 120 may be 
recognised net of amounts relating to changes in the carrying amount of the right to 
reimbursement.
117 Sometimes, an entity is able to look to another party, such as an insurer, to pay part or all of the 
expenditure required to settle a defined benefit obligation. Qualifying insurance policies, as defined 
in paragraph 8, are plan assets. An entity accounts for qualifying insurance policies in the same way 
as for all other plan assets and paragraph 116 is not relevant (see paragraphs 46–49 and 115).
118 When an insurance policy held by an entity is not a qualifying insurance policy, that insurance policy 
is not a plan asset. Paragraph 116 is relevant to such cases: the entity recognises its right to 
reimbursement under the insurance policy as a separate asset, rather than as a deduction in
determining the defined benefit deficit or surplus. Paragraph 140(b) requires the entity to disclose a 
brief description of the link between the reimbursement right and the related obligation.
119 If the right to reimbursement arises under an insurance policy that exactly matches the amount and 
timing of some or all of the benefits payable under a defined benefit plan, the fair value of the 
reimbursement right is deemed to be the present value of the related obligation (subject to any 
reduction required if the reimbursement is not recoverable in full).
Components of defined benefit cost
120 An entity shall recognise the components of defined benefit cost, except to the extent that 
another Ind AS requires or permits their inclusion in the cost of an asset, as follows:
(a) service cost (see paragraphs 66–112) in profit or loss;
(b) net interest on the net defined benefit liability (asset) (see paragraphs 123–126) in profit 
or loss; and
(c) remeasurements of the net defined benefit liability (asset) (see paragraphs 127–130) in 
other comprehensive income.
861
121 Other Ind ASs require the inclusion of some employee benefit costs within the cost of assets, such as 
inventories and property, plant and equipment (see Ind AS 2 and Ind AS 16). Any post-employment 
benefit costs included in the cost of such assets include the appropriate proportion of the components
listed in paragraph 120.
122 Remeasurements of the net defined benefit liability (asset) recognised in other comprehensive 
income shall not be reclassified to profit or loss in a subsequent period. However, the entity 
may transfer those amounts recognised in other comprehensive income within equity.
Net interest on the net defined benefit liability (asset) 
123 Net interest on the net defined benefit liability (asset) shall be determined by multiplying the 
net defined benefit liability (asset) by the discount rate specified in paragraph 83, both as 
determined at the start of the annual reporting period, taking account of any changes in the 
net defined benefit liability (asset) during the period as a result of contribution and benefit
payments.
124 Net interest on the net defined benefit liability (asset) can be viewed as comprising interest income 
on plan assets, interest cost on the defined benefit obligation and interest on the effect of the asset 
ceiling mentioned in paragraph 64.
125 Interest income on plan assets is a component of the return on plan assets, and is determined by 
multiplying the fair value of the plan assets by the discount rate specified in paragraph 83, both as 
determined at the start of the annual reporting period, taking account of any changes in the plan 
assets held during the period as a result of contributions and benefit payments. The difference 
between the interest income on plan assets and the return on plan assets is included in the 
remeasurement of the net defined benefit liability (asset).
126 Interest on the effect of the asset ceiling is part of the total change in the effect of the asset ceiling, 
and is determined by multiplying the effect of the asset ceiling by the discount rate specified in 
paragraph 83, both as determined at the start of the annual reporting period. The difference between 
that amount and the total change in the effect of the asset ceiling is included in the remeasurement of 
the net defined benefit liability (asset).
Remeasurements of the net defined benefit liability (asset)
127 Remeasurements of the net defined benefit liability (asset) comprise:
(a) actuarial gains and losses (see paragraphs 128 and 129);
(b) the return on plan assets (see paragraph 130), excluding amounts included in net interest on the 
net defined benefit liability (asset) (see paragraph 125); and
(c) any change in the effect of the asset ceiling, excluding amounts included in net interest on the 
net defined benefit liability (asset) (see paragraph 126).
128 Actuarial gains and losses result from increases or decreases in the present value of the defined 
benefit obligation because of changes in actuarial assumptions and experience adjustments. Causes 
of actuarial gains and losses include, for example:
862
(a) unexpectedly high or low rates of employee turnover, early retirement or mortality or of 
increases in salaries, benefits (if the formal or constructive terms of a plan provide for 
inflationary benefit increases) or medical costs;
(b) the effect of changes to assumptions concerning benefit payment options;
(c) the effect of changes in estimates of future employee turnover, early retirement or mortality or 
of increases in salaries, benefits (if the formal or constructive terms of a plan provide for
inflationary benefit increases) or medical costs; and
(d) the effect of changes in the discount rate.
129 Actuarial gains and losses do not include changes in the present value of the defined benefit 
obligation because of the introduction, amendment, curtailment or settlement of the defined benefit 
plan, or changes to the benefits payable under the defined benefit plan. Such changes result in past 
service cost or gains or losses on settlement.
130 In determining the return on plan assets, an entity deducts the costs of managing the plan assets and 
any tax payable by the plan itself, other than tax included in the actuarial assumptions used to 
measure the defined benefit obligation (paragraph 76). Other administration costs are not deducted 
from the return on plan assets.
Presentation
Offset
131 An entity shall offset an asset relating to one plan against a liability relating to another plan 
when, and only when, the entity:
(a) has a legally enforceable right to use a surplus in one plan to settle obligations under the 
other plan; and
(b) intends either to settle the obligations on a net basis, or to realize the surplus in one plan 
and settle its obligation under the other plan simultaneously.
132 The offsetting criteria are similar to those established for financial instruments in Ind AS 32,
Financial Instruments: Presentation.
Current/non-current distinction
133 Some entities distinguish current assets and liabilities from non-current assets and liabilities. This 
Standard does not specify whether an entity should distinguish current and non-current portions of 
assets and liabilities arising from post-employment benefits.
Components of defined benefit cost
863
134 Paragraph 120 requires an entity to recognise service cost and net interest on the net defined benefit 
liability (asset) in profit or loss. This Standard does not specify how an entity should present service 
cost and net interest on the net defined benefit liability (asset). An entity presents those components 
in accordance with Ind AS1.
Disclosure
135 An entity shall disclose information that:
(a) explains the characteristics of its defined benefit plans and risks associated with them (see 
paragraph 139);
(b) identifies and explains the amounts in its financial statements arising from its defined 
benefit plans (see paragraphs 140–144); and
(c) describes how its defined benefit plans may affect the amount, timing and uncertainty of 
the entity’s future cash flows (see paragraphs 145–147).
136 To meet the objectives in paragraph 135, an entity shall consider all the following:
(a) the level of detail necessary to satisfy the disclosure requirements;
(b) how much emphasis to place on each of the various requirements;
(c) how much aggregation or disaggregation to undertake; and
(d) whether users of financial statements need additional information to evaluate the quantitative 
information disclosed.
137 If the disclosures provided in accordance with the requirements in this Standard and other Ind ASs 
are insufficient to meet the objectives in paragraph 135, an entity shall disclose additional 
information necessary to meet those objectives. For example, an entity may present an analysis of 
the present value of the defined benefit obligation that distinguishes the nature, characteristics and 
risks of the obligation. Such a disclosure could distinguish:
(a) between amounts owing to active members, deferred members, and pensioners.
(b) between vested benefits and accrued but not vested benefits.
(c) between conditional benefits, amounts attributable to future salary increases and other benefits.
138 An entity shall assess whether all or some disclosures should be disaggregated to distinguish plans or 
groups of plans with materially different risks. For example, an entity may disaggregate disclosure 
about plans showing one or more of the following features:
(a) different geographical locations.
(b) different characteristics such as flat salary pension plans, final salary pension plans or postemployment medical plans.
864
(c) different regulatory environments.
(d) different reporting segments.
(e) different funding arrangements (eg wholly unfunded, wholly or partly funded).
Characteristics of defined benefit plans and risks associated with them
139 An entity shall disclose:
(a) information about the characteristics of its defined benefit plans, including:
(i) the nature of the benefits provided by the plan (eg final salary defined benefit plan or 
contribution-based plan with guarantee).
(ii) a description of the regulatory framework in which the plan operates, for example the 
level of any minimum funding requirements, and any effect of the regulatory framework 
on the plan, such as the asset ceiling (see paragraph 64).
(iii) a description of any other entity’s responsibilities for the governance of the plan, for 
example responsibilities of trustees or of board members of the plan.
(b) a description of the risks to which the plan exposes the entity, focused on any unusual, entityspecific or plan-specific risks, and of any significant concentrations of risk. For example, if 
plan assets are invested primarily in one class of investments, eg property, the plan may expose 
the entity to a concentration of property market risk.
(c) a description of any plan amendments, curtailments and settlements.
Explanation of amounts in the financial statements
140 An entity shall provide a reconciliation from the opening balance to the closing balance for each of 
the following, if applicable:
(a) the net defined benefit liability (asset), showing separate reconciliations for:
(i) plan assets.
(ii) the present value of the defined benefit obligation.
(iii) the effect of the asset ceiling.
(b) any reimbursement rights. An entity shall also describe the relationship between any 
reimbursement right and the related obligation.
141 Each reconciliation listed in paragraph 140 shall show each of the following, if applicable:
(a) current service cost.
865
(b) interest income or expense.
(c) remeasurements of the net defined benefit liability (asset), showing separately:
(i) the return on plan assets, excluding amounts included in interest in (b).
(ii) actuarial gains and losses arising from changes in demographic assumptions (see 
paragraph 76(a)).
(iii) actuarial gains and losses arising from changes in financial assumptions (see paragraph 
76(b)).
(iv) changes in the effect of limiting a net defined benefit asset to the asset ceiling, excluding 
amounts included in interest in (b). An entity shall also disclose how it determined the
maximum economic benefit available, ie whether those benefits would be in the form of 
refunds, reductions in future contributions or a combination of both.
(d) past service cost and gains and losses arising from settlements. As permitted by paragraph 100, 
past service cost and gains and losses arising from settlements need not be distinguished if they
occur together.
(e) the effect of changes in foreign exchange rates.
(f) contributions to the plan, showing separately those by the employer and by plan participants.
(g) payments from the plan, showing separately the amount paid in respect of any settlements.
(h) the effects of business combinations and disposals.
142 An entity shall disaggregate the fair value of the plan assets into classes that distinguish the nature 
and risks of those assets, subdividing each class of plan asset into those that have a quoted market 
price in an active market (as defined in Ind AS 113, Fair Value Measurement) and those that do not. 
For example, and considering the level of disclosure discussed in paragraph 136, an entity could 
distinguish between:
(a) cash and cash equivalents;
(b) equity instruments (segregated by industry type, company size, geography etc);
(c) debt instruments (segregated by type of issuer, credit quality, geography etc);
(d) real estate (segregated by geography etc);
(e) derivatives (segregated by type of underlying risk in the contract, for example, interest rate 
contracts, foreign exchange contracts, equity contracts, credit contracts, longevity swaps etc);
(f) investment funds (segregated by type of fund);
866
(g) asset-backed securities; and
(h) structured debt.
143 An entity shall disclose the fair value of the entity’s own transferable financial instruments held as
plan assets, and the fair value of plan assets that are property occupied by, or other assets used by, 
the entity.
144 An entity shall disclose the significant actuarial assumptions used to determine the present value of 
the defined benefit obligation (see paragraph 76). Such disclosure shall be in absolute terms (eg as 
an absolute percentage, and not just as a margin between different percentages and other variables). 
When an entity provides disclosures in total for a grouping of plans, it shall provide such disclosures 
in the form of weighted averages or relatively narrow ranges.
Amount, timing and uncertainty of future cash flows
145 An entity shall disclose:
(a) a sensitivity analysis for each significant actuarial assumption (as disclosed under paragraph 
144) as of the end of the reporting period, showing how the defined benefit obligation would 
have been affected by changes in the relevant actuarial assumption that were reasonably 
possible at that date.
(b) the methods and assumptions used in preparing the sensitivity analyses required by (a) and the 
limitations of those methods.
(c) changes from the previous period in the methods and assumptions used in preparing the 
sensitivity analyses, and the reasons for such changes.
146 An entity shall disclose a description of any asset-liability matching strategies used by the plan or the 
entity, including the use of annuities and other techniques, such as longevity swaps, to manage risk.
147 To provide an indication of the effect of the defined benefit plan on the entity’s future cash flows, an 
entity shall disclose:
(a) a description of any funding arrangements and funding policy that affect future contributions.
(b) the expected contributions to the plan for the next annual reporting period.
(c) information about the maturity profile of the defined benefit obligation. This will include the 
weighted average duration of the defined benefit obligation and may include other information 
about the distribution of the timing of benefit payments, such as a maturity analysis of the 
benefit payments.
Multi-employer plans
148 If an entity participates in a multi-employer defined benefit plan, it shall disclose:
867
(a) a description of the funding arrangements, including the method used to determine the entity’s 
rate of contributions and any minimum funding requirements.
(b) a description of the extent to which the entity can be liable to the plan for other entities’ 
obligations under the terms and conditions of the multi-employer plan.
(c) a description of any agreed allocation of a deficit or surplus on:
(i) wind-up of the plan; or
(ii) the entity’s withdrawal from the plan.
(d) if the entity accounts for that plan as if it were a defined contribution plan in accordance with 
paragraph 34, it shall disclose the following, in addition to the information required by (a)–(c)
and instead of the information required by paragraphs 139–147:
(i) the fact that the plan is a defined benefit plan.
(ii) the reason why sufficient information is not available to enable the entity to account for 
the plan as a defined benefit plan.
(iii) the expected contributions to the plan for the next annual reporting period.
(iv) information about any deficit or surplus in the plan that may affect the amount of future 
contributions, including the basis used to determine that deficit or surplus and the
implications, if any, for the entity.
(v) an indication of the level of participation of the entity in the plan compared with other 
participating entities. Examples of measures that might provide such an indication 
include the entity’s proportion of the total contributions to the plan or the entity’s 
proportion of the total number of active members, retired members, and former members 
entitled to benefits, if that information is available.
Defined benefit plans that share risks between entities under common control
149 If an entity participates in a defined benefit plan that shares risks between entities under common 
control, it shall disclose:
(a) the contractual agreement or stated policy for charging the net defined benefit cost or the fact 
that there is no such policy.
(b) the policy for determining the contribution to be paid by the entity.
(c) if the entity accounts for an allocation of the net defined benefit cost as noted in paragraph 41, 
all the information about the plan as a whole required by paragraphs 135–147.
(d) if the entity accounts for the contribution payable for the period as noted in paragraph 41, the 
information about the plan as a whole required by paragraphs 135–137, 139, 142–144 and 
147(a) and (b).
868
150 The information required by paragraph 149(c) and (d) can be disclosed by cross-reference to 
disclosures in another group entity’s financial statements if:
(a) that group entity’s financial statements separately identify and disclose the information required 
about the plan; and
(b) that group entity’s financial statements are available to users of the financial statements on the 
same terms as the financial statements of the entity and at the same time as, or earlier than, the 
financial statements of the entity.
Disclosure requirements in other Ind ASs
151 Where required by Ind AS 24 an entity discloses information about:
(a) related party transactions with post-employment benefit plans; and
(b) post-employment benefits for key management personnel.
152 Where required by Ind AS 37 an entity discloses information about contingent liabilities arising from 
post-employment benefit obligations.
Other long-term employee benefits
153 Other long-term employee benefits include items such as the following, if not expected to be settled 
wholly before twelve months after the end of the annual reporting period in which the employees 
render the related service:
(a) long-term paid absences such as long-service or sabbatical leave;
(b) jubilee or other long-service benefits;
(c) long-term disability benefits;
(d) profit-sharing and bonuses; and
(e) deferred remuneration.
154 The measurement of other long-term employee benefits is not usually subject to the same degree of 
uncertainty as the measurement of post-employment benefits. For this reason, this Standard requires 
a simplified method of accounting for other long-term employee benefits. Unlike the accounting 
required for post-employment benefits, this method does not recognise remeasurements in other 
comprehensive income.
Recognition and measurement
155 In recognising and measuring the surplus or deficit in an other long-term employee benefit 
plan, an entity shall apply paragraphs 56–98 and 113–115. An entity shall apply paragraphs 
116–119 in recognising and measuring any reimbursement right.
869
156 For other long-term employee benefits, an entity shall recognise the net total of the following 
amounts in profit or loss, except to the extent that another Ind AS requires or permits their 
inclusion in the cost of an asset:
(a) service cost (see paragraphs 66–112);
(b) net interest on the net defined benefit liability (asset) (see paragraphs 123–126); and
(c) remeasurements of the net defined benefit liability (asset) (see paragraphs 127–130).
157 One form of other long-term employee benefit is long-term disability benefit. If the level of benefit 
depends on the length of service, an obligation arises when the service is rendered. Measurement of 
that obligation reflects the probability that payment will be required and the length of time for which 
payment is expected to be made. If the level of benefit is the same for any disabled employee 
regardless of years of service, the expected cost of those benefits is recognised when an event occurs 
that causes a long-term disability.
Disclosure
158 Although this Standard does not require specific disclosures about other long-term employee 
benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about 
employee benefits for key management personnel. Ind AS 1 requires disclosure of employee benefits
expense.
Termination benefits
159 This Standard deals with termination benefits separately from other employee benefits because the 
event that gives rise to an obligation is the termination of employment rather than employee service. 
Termination benefits result from either an entity’s decision to terminate the employment or an 
employee’s decision to accept an entity’s offer of benefits in exchange for termination of 
employment.
160 Termination benefits do not include employee benefits resulting from termination of employment at 
the request of the employee without an entity’s offer, or as a result of mandatory retirement 
requirements, because those benefits are post-employment benefits. Some entities provide a lower 
level of benefit for termination of employment at the request of the employee (in substance, a postemployment benefit) than for termination of employment at the request of the entity. The difference 
between the benefit provided for termination of employment at the request of the employee and a 
higher benefit provided at the request of the entity is a termination benefit.
161 The form of the employee benefit does not determine whether it is provided in exchange for service 
or in exchange for termination of the employee’s employment. Termination benefits are typically 
lump sum payments, but sometimes also include:
(a) enhancement of post-employment benefits, either indirectly through an employee benefit plan 
or directly.
870
(b) salary until the end of a specified notice period if the employee renders no further service that 
provides economic benefits to the entity.
162 Indicators that an employee benefit is provided in exchange for services include the following:
(a) the benefit is conditional on future service being provided (including benefits that increase if 
further service is provided).
(b) the benefit is provided in accordance with the terms of an employee benefit plan.
163 Some termination benefits are provided in accordance with the terms of an existing employee benefit 
plan. For example, they may be specified by statute, employment contract or union agreement, or 
may be implied as a result of the employer’s past practice of providing similar benefits. As another 
example, if an entity makes an offer of benefits available for more than a short period, or there is 
more than a short period between the offer and the expected date of actual termination, the entity
considers whether it has established a new employee benefit plan and hence whether the benefits 
offered under that plan are termination benefits or post-employment benefits. Employee benefits 
provided in accordance with the terms of an employee benefit plan are termination benefits if they 
both result from an entity’s decision to terminate an employee’s employment and are not conditional 
on future service being provided.
164 Some employee benefits are provided regardless of the reason for the employee’s departure. The 
payment of such benefits is certain (subject to any vesting or minimum service requirements) but the 
timing of their payment is uncertain. Although such benefits are described in some jurisdictions as 
termination indemnities or termination gratuities, they are post-employment benefits rather than 
termination benefits, and an entity accounts for them as post-employment benefits.
Recognition
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 Ind AS 37 
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.
871
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
Background
As 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 Rs 30,000. Employees leaving before closure of the factory 
will receive Rs.10,000. 
872
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 
Rs.3,200,000 (ie 20 × RS.10,000 + 100 × Rs.30,000). 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 benefits
The benefit provided in exchange for termination of employment is Rs.10,000. 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 Rs.1,200,000 (ie 120 × Rs.10,000) 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 service
The incremental benefits that employees will receive if they provide services for the full tenmonth 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 Rs.200,000 (ie Rs.2,000,000 ÷ 10) is recognised in each month during the service 
period of ten months, with a corresponding increase in the carrying amount of the liability.
Disclosure
171 Although this Standard does not require specific disclosures about termination benefits, other Ind 
ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits 
for key management personnel. Ind AS 1 requires disclosure of employee benefits expense.
873
Appendix A
Application Guidance
This appendix is an integral part of the Ind AS. It describes the application of paragraphs 92– 93 
and has the same authority as the other parts of the Ind AS.
A1 The accounting requirements for contributions from employees or third parties are illustrated 
in the diagram below.
Contributions from employees or third parties
 
(1) This dotted arrow means that an entity is permitted to choose either accounting.
Set out in the formal terms of the plan (or arise from a
constructive obligation that goes beyond those terms) Discretionary
Linked to service Not linked to 
service (for 
example, reduce a 
deficit)
Dependent on
the number of 
years of service
Independent of 
the number of 
years of service
(1)
Reduce service
cost in the period
in which the
related service
is rendered
(paragraph 93(b))
Reduce service
cost by being
attributed to
periods of service
(paragraph 93(a))
Affect
remeasurements
(paragraph 93)
Reduce service
cost upon
payment to
the plan
(paragraph 92)
874
Appendix B
Ind AS 19 —The Limit on a Defined Benefit Asset, Minimum 
Funding Requirements and their Interaction
This Appendix is an integral part of the Ind AS.
Background
1 Paragraph 64 of Ind 19 limits the measurement of a net defined benefit asset to the lower of 
the surplus in the defined benefit plan and the asset ceiling. Paragraph 8 of Ind AS 19
defines the asset ceiling as ‘the present value of any economic benefits available in the form 
of refunds from the plan or reductions in future contributions to the plan’. Questions have 
arisen about when refunds or reductions in future contributions should be regarded as 
available, particularly when a minimum funding requirement exists.
2 Minimum funding requirements exist in many countries to improve the security of the postemployment benefit promise made to members of an employee benefit plan. Such 
requirements normally stipulate a minimum amount or level of contributions that must be 
made to a plan over a given period. Therefore, a minimum funding requirement may limit the 
ability of the entity to reduce future contributions.
3 Further, the limit on the measurement of a defined benefit asset may cause a minimum 
funding requirement to be onerous. Normally, a requirement to make contributions to a plan 
would not affect the measurement of the defined benefit asset or liability. This is because the 
contributions, once paid, will become plan assets and so the additional net liability is nil. 
However, a minimum funding requirement may give rise to a liability if the required 
contributions will not be available to the entity once they have been paid.
3A [Refer Appendix 1].
Scope
4 This Appendix applies to all post-employment defined benefits and other long-term 
employee defined benefits.
5 For the purpose of this Appendix, minimum funding requirements are any requirements to 
fund a post-employment or other long-term defined benefit plan.
875
Issues
6 The issues addressed in this Appendix are:
(a) when refunds or reductions in future contributions should be regarded as available in 
accordance with the definition of the asset ceiling in paragraph 8 of Ind AS 19 .
(b) how a minimum funding requirement might affect the availability of reductions in 
future contributions.
(c) when a minimum funding requirement might give rise to a liability.
Principles
Availability of a refund or reduction in future contributions
7 An entity shall determine the availability of a refund or a reduction in future contributions in 
accordance with the terms and conditions of the plan and any statutory requirements in the 
jurisdiction of the plan.
8 An economic benefit, in the form of a refund or a reduction in future contributions, is 
available if the entity can realise it at some point during the life of the plan or when the plan 
liabilities are settled. In particular, such an economic benefit may be available even if it is not 
realisable immediately at the end of the reporting period.
9 The economic benefit available does not depend on how the entity intends to use the surplus. 
An entity shall determine the maximum economic benefit that is available from refunds, 
reductions in future contributions or a combination of both. An entity shall not recognise 
economic benefits from a combination of refunds and reductions in future contributions 
based on assumptions that are mutually exclusive.
10 In accordance with Ind AS 1, the entity shall disclose information about the key sources of 
estimation uncertainty at the end of the reporting period that have a significant risk of 
causing a material adjustment to the carrying amount of the net asset or liability recognised 
in the balance sheet. This might include disclosure of any restrictions on the current 
realisability of the surplus or disclosure of the basis used to determine the amount of the 
economic benefit available.
The economic benefit available as a refund
The right to a refund
11 A refund is available to an entity only if the entity has an unconditional right to a refund:
876
(a) during the life of the plan, without assuming that the plan liabilities must be settled in 
order to obtain the refund (eg in some jurisdictions, the entity may have a right to a 
refund during the life of the plan, irrespective of whether the plan liabilities are 
settled); or
(b) assuming the gradual settlement of the plan liabilities over time until all members have 
left the plan; or
(c) assuming the full settlement of the plan liabilities in a single event (ie as a plan windup).
An unconditional right to a refund can exist whatever the funding level of a plan at the 
end of the reporting period.
12 If the entity’s right to a refund of a surplus depends on the occurrence or non-occurrence of 
one or more uncertain future events not wholly within its control, the entity does not have an 
unconditional right and shall not recognise an asset.
Measurement of the economic benefit
13 An entity shall measure the economic benefit available as a refund as the amount of the 
surplus at the end of the reporting period (being the fair value of the plan assets less the 
present value of the defined benefit obligation) that the entity has a right to receive as a 
refund, less any associated costs. For instance, if a refund would be subject to a tax other than 
income tax, an entity shall measure the amount of the refund net of the tax.
14 In measuring the amount of a refund available when the plan is wound up (paragraph 11(c)), 
an entity shall include the costs to the plan of settling the plan liabilities and making the 
refund. For example, an entity shall deduct professional fees if these are paid by the plan 
rather than the entity, and the costs of any insurance premiums that may be required to secure 
the liability on wind-up.
15 If the amount of a refund is determined as the full amount or a proportion of the surplus, 
rather than a fixed amount, an entity shall make no adjustment for the time value of money, 
even if the refund is realisable only at a future date.
The economic benefit available as a contribution reduction
16 If there is no minimum funding requirement for contributions relating to future service, the 
economic benefit available as a reduction in future contributions is the future service cost to 
the entity for each period over the shorter of the expected life of the plan and the expected 
life of the entity. The future service cost to the entity excludes amounts that will be borne by 
employees.
17 An entity shall determine the future service costs using assumptions consistent with those 
used to determine the defined benefit obligation and with the situation that exists at the end 
877
of the reporting period as determined by Ind AS 19. Therefore, an entity shall assume no 
change to the benefits to be provided by a plan in the future until the plan is amended and 
shall assume a stable workforce in the future unless the entity makes a reduction in the 
number of employees covered by the plan. In the latter case, the assumption about the future 
workforce shall include the reduction.
The effect of a minimum funding requirement on the economic benefit 
available as a reduction in future contributions
18 An entity shall analyse any minimum funding requirement at a given date into contributions 
that are required to cover (a) any existing shortfall for past service on the minimum funding 
basis and (b) future service.
19 Contributions to cover any existing shortfall on the minimum funding basis in respect of 
services already received do not affect future contributions for future service. They may give 
rise to a liability in accordance with paragraphs 23–26.
20 If there is a minimum funding requirement for contributions relating to future service, the 
economic benefit available as a reduction in future contributions is the sum of:
(a) any amount that reduces future minimum funding requirement contributions for 
future service because the entity made a prepayment (ie paid the amount before 
being required to do so); and
(b) the estimated future service cost in each period in accordance with paragraphs 16 
and 17, less the estimated minimum funding requirement contributions that would 
be required for future service in those periods if there were no prepayment as 
described in (a).
21 An entity shall estimate the future minimum funding requirement contributions for future 
service taking into account the effect of any existing surplus determined using the minimum
funding basis but excluding the prepayment described in paragraph 20(a). An entity shall use 
assumptions consistent with the minimum funding basis and, for any factors not specified by 
that basis, assumptions consistent with those used to determine the defined benefit obligation 
and with the situation that exists at the end of the reporting period as determined by Ind AS 
19. The estimate shall include any changes expected as a result of the entity paying the 
minimum contributions when they are due. However, the estimate shall not include the effect 
of expected changes in the terms and conditions of the minimum funding basis that are not 
substantively enacted or contractually agreed at the end of the reporting period.
22 When an entity determines the amount described in paragraph 20(b), if the future minimum 
funding requirement contributions for future service exceed the future IAS 19 service cost in 
any given period, that excess reduces the amount of the economic benefit available as a 
reduction in future contributions. However, the amount described in paragraph 20(b) can 
never be less than zero.
878
When a minimum funding requirement may give rise to a liability
23 If an entity has an obligation under a minimum funding requirement to pay contributions to 
cover an existing shortfall on the minimum funding basis in respect of services already 
received, the entity shall determine whether the contributions payable will be available as a 
refund or reduction in future contributions after they are paid into the plan.
24 To the extent that the contributions payable will not be available after they are paid into the 
plan, the entity shall recognise a liability when the obligation arises. The liability shall reduce 
the net defined benefit asset or increase the net defined benefit liability so that no gain or loss 
is expected to result from applying paragraph 64 of Ind AS 19 when the contributions are 
paid.
25-26 (refer Appendix 1)
879
Appendix 1
Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is 
only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 19 and the 
corresponding International Accounting Standard (IAS) 19, Employee Benefits, and IFRIC 14, IAS 19 —
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, issued by 
the International Accounting Standards Board.
Comparison with IAS 19, Employee Benefits, and IFRIC 14
1 Paragraph numbers 25-26 appear as ‘Deleted’ in IFRIC 14. In order to maintain consistency 
with paragraph numbers of IFRIC 14, the paragraph numbers are retained in Appendix B of 
Ind AS 19.
2 According to Ind AS 19 the rate to be used to discount post-employment benefit obligation shall be 
determined by reference to the market yields on government bonds, whereas under IAS 19 , the 
government bonds can be used only where there is no deep market of high quality corporate bonds.
However, requirements given in IAS 19 in this regard have been retained with appropriate 
modifications for subsidiaries, associates, joint ventures and branches domiciled outside India.
3 To illustrate treatment of gratuity subject to ceiling under Indian Gratuity Rules, an example has 
been added in paragraph 73.
4 Different terminology is used in this standard, e.g., the term ‘balance sheet’ is used instead of 
‘Statement of financial position’. The words ‘approval of the financial statements for issue have 
been used instead of ‘authorisation of the financial statements for issue ’ in the context of financial 
statements considered for the purpose of events after the reporting period.
5 Paragraph 3A of Appendix B is deleted as this paragraph deals with reason for amending IFRIC 14, 
which is irrelevant for Appendix B to Ind AS 19 .

find Summary