IAS 19 - EMPLOYEE BENEFITS

Vocabulary flashcards covering key terms from the IAS 19 lecture notes on employee benefits and severance pay.

IAS 19 – Employee Benefits

IFRS standard classifying employee compensation into four categories: short-term benefits, post-termination benefits, benefits due for termination of employment, and other long-term benefits.

Short-term benefits

Benefits payable to employees for services rendered in the short term, such as wages and social security contributions.

Post-termination benefits

Benefits payable after termination of employment, including pensions, life insurance, and medical care.

Benefits due for termination of employment

Benefits arising on termination of employment (e.g., early retirement benefits, retirement incentives).

Other long-term benefits

Long-term benefits such as sabbatical or jubilee leave, long disability, and certain deferred bonuses.

Defined contribution plan

Post-termination plan where the entity’s obligation is to transfer contributions to a separate fund; investment risk mainly lies with the employee.

Defined benefits plan

Post-termination plan where the entity guarantees benefits; actuarial and investment risk lie with the entity.

Current labor compensation

Costs related to current labor (wages, social security contributions, vacation, paid absences, profit sharing) recognized for current employees.

Liability and cost recognition

Recognition of a liability and a cost for work performed: liability equal to contributions payable, net of payments already made.

Projected Unit Credit Method

Method to determine the present value of defined benefit obligations and related cost, allocating benefit cost to current and prior years using actuarial assumptions.

Present value of the defined benefit obligation

Current value of the obligation to provide defined benefits, discounted to reflect time and expected salary increases.

Accrued benefits

Benefits already accrued for work services rendered.

Actuarial assumptions

Assumptions about demographic and financial variables used in actuarial valuation.

Actuarial gains and losses

Gains or losses from changes in actuarial assumptions; recognized in other comprehensive income.

Interest cost

Component of defined benefit cost representing the increase in the obligation due to the passage of time.

Current service cost

Increase in the defined benefit obligation resulting from employee service in the current period.

Severance pay

Deferred form of employee compensation that accrues until the end of employment; rules may direct it to pension funds or INPS.

Legislative Decree 252/2005

Italian reform changing severance pay rules after 2006, including worker freedom to choose destination for severance pay.

INPS

Italian National Institute of Social Security; the treasury account to which severance pay contributions may be directed when kept in company or paid to INPS.

Pension funds

External funds to which severance pay can be directed in place of INPS.

Sabbatical / jubilee leave

Examples of other long-term benefits beyond wages and pensions.

IAS 19 reserve in equity (OCI)

Actuarial gains and losses recognized in other comprehensive income and accumulated in the IAS 19 reserve in equity.