by 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:
- 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
- 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).
Different employee benefits under AS 19
Short-term employee benefits: There are those which are expected to be fully paid before 12 months after the end of the accounting period in which the employee rendered service.
Other long-term employee benefits: There are those which are not expected to be fully paid within 12 months after the end of the accounting period.
Termination benefits: These are those which are paid to an employee who is terminated from service due to the employer’s decision.
Post Employment benefits: These are those employee benefits which are paid after the completion of employment.
Short-term employee benefit includes the following:
Recognition & Measurement
Once the employee renders service to an employer, the expected amount of short-term employee benefits to be paid for such service has to be recognized as a liability or as an expense. It is considered a revenue expenditure generally except when any other standard requires it to be capitalized.
Types of short-term benefits
Short-term employee benefits are of two types:
- Paid absences
- Profit sharing and bonus plan
Paid Absences
These are compensated absences and can be classified as accumulating paid absences and non-accumulating paid absences. Examples of such absences are holidays, sickness, maternity, etc and their related cost are recognized as follows:
| Description | Cost Recognition |
| Accumulating paid absence | When services rendered increases the employees right to future paid absence |
| Non-accumulating paid absences | When such absences occur |
Profit-Sharing and Bonus Plan
‘Profit sharing’ and ‘Bonus Plan’ are benefits such as employee’s annual incentive, managing director’s commission etc. These costs are recognized when the employer:
- Has a present obligation to make such payment on account of past events.
- Has the reliable estimate of expected payment that can be made.
