CHAPTER20

OTHEREMPLOYEEBENEFI
TS

TECHNI
CALKNOWLEDGE

Toi
dent
if
yshor
t-t
erm empl
oyeebenef
it
s.

To know the r
ecogni
ti
on and measur
ementofshor
t-t
erm empl
oyee
benefi
ts.

Toi
dent
if
yot
herl
ong-
ter
m empl
oyeebenef
it
s.

To know the r
ecogni
ti
on and measur
ementofot
herl
ong empl
oyee
benefi
ts.

Toknowt
her
ecogni
ti
onandmeasur
ementoft
ermi
nat
ionbenef
it
s.
Shor
t-t
erm empl
oyeebenef
it
s
Short
-ter
m employeebenef
it
sareemployeebenef i
tsot
herthanter
minati
onbenefi
ts
whichareexpect
edtobesettl
edwholl
ywi t
hintwel
vemont hsaft
ertheendofannual
repor
ti
ngperiodi
nwhichtheemployeesrendertherel
atedservi
ce.

Shor
t-t
erm empl
oyeebenef
it
sincl
udet
hef
oll
owi
ng:

a.Sal
ari
es,wagesandsoci
alsecur
it
ycont
ri
but
ions

b.Shor
t-t
erm compensat
edorpai
dabsencessuchaspai
dannuall
eaveand
pai
dsickl
eave

c.Pr
ofi
tshar
ingandbonusespayabl
ewi
thi
ntwel
vemont
hs

d.Nonmonet ar
y benef
it
s,such as medi
calcar
e,housi
ng,carand f
ree or
subsi
dizedgoods.

Recogni
ti
onandmeasur
ement
Account
ingforshor
t-t
erm empl
oyeebenef
it
sisf
air
lyst
rai
ght
for
war
dbecauset
her
e
ar
enoact uar
ial
assumpti
ons.

Thereisnor equi
rementtodiscountf
utur
ebenef
it
sbecausesuchbenefi
tsar ,by
eal
l
defi
nit
ion,payabl
enolaterthantwelvemont
hsaftert
heendofthecurr
entrepor
ti
ng
peri
od.

Ther
eisnopossi
bil
i
tyofact
uari
algai
norlossbecauseshor
t-t
erm empl
oyeebenef
it
s
aremeasur
edonanundiscountedbasi
s.

Account
ingpr
ocedur
es
Therulesforshort
-ter
m employeebenef
it
sar
eessent
ial
l
yanappl
i
cat
i orbasi
onf c
accounti
ngpri
ncipl
esandpracti
ce.
a.Unpaid short
-term employeebenefit
sattheendoft
heaccount
ingper
iod
shal
lber ecognizedasaccruedexpense.
b.Anyshort
-ter
m benefi
tspaidi
nadvanceshall
ber zedasapr
ecogni epayment
,
t
ot heextent
,thatitwil
lleadtoar educt
ioninfut
urepayment
soracash
ref
und.

d.Thecostofshor
t-t
erm benef
it
sshal
lber zedasexpensei
ecogni ntheper
iod
 whentheeconomicbenefi
tisgi
ven,exceptwhensuchcostmaybeincl
uded
wit
hinthecostofanasset,forexample,proper
ty,pl
antandequi
pmentin
accor
dancewit
hanotherst
andard.

Shor
t-t
erm compensat
edorpai
dabsences
Anentit
ymaypayempl oyeesforabsencesforvar
iousreasonssuchasvacat
ion,
si
cknessandshor
t-t
erm disabi
l
it
y,mater
nit
yorpater
nit
yandmi l
it
aryser
vice.

Ent
it
lementt
opaidabs encesf
all
sint
otwocat
egor
ies
,namel
yaccumul
ati
ngand
nonaccumul
ati
ngabsences.

Accumulat
ingpai
dabsencesarethosethatar
ecarri
edf or
wardandcanbeusedi
n
fut
ureperi
odsi
fthecur
rentper
iod’
senti
tl
ementisnotusedinf
ull
.

Accumul
ati
ngpai
dabsencesmaybeei
ther
:

a.Vest
ing– meaning,empl
oyeesar
eent
it
ledt
oacashpaymentf
orunused
ent
it
lementonl
eavingt
heent
it
y.

b.Nonvest
ing–meaning,empl
oyeesnotent
it
ledt
oacashpaymentf
orunused
ent
it
lementonl
eavi
ngtheent
it
y.

Nonaccumulat
ingpai
dabsencesarethosethatr
enotcarr
iedforwar
d.Suchbenefi
ts
l
apseifthecur
rentper
iod’
senti
tl
ementisnotusedanddonotent i
tl
etheemployees
t
oacashpaymentf orunusedenti
tl
ementonleavi
ngtheenti
ty.

Thi
si scommonl
yt he case forsi
ckpay,mat
erni
tyorpat
erni
tyl
eave,and pai
d
absencesf
ormi
li
tar
yservice.
I
l
lust
rat
ion
Empl
oyeesareeachent
it
ledt
otwoweeksofpaidvacati
onleave.Dur
ingt
heyear
,
t
heemployeesear
ned1,
000weeksofvacat
ionl
eaveandused600weeks.

Thecurrentsal
aryoftheemployeesi
sanaverageofP2,000perweekandt he
sal
aryi
sexpectedtoi
ncreasebyP200perweekoraf
utur
eweekl
ysal
aryofP2,
200.

Accumul
ati
ngpai
dvacat
ionl
eave
1
.Tor
ecor
dtheusedvacat
ionweeks
:

Vacat
ionpayexpense(
600xP2,
000) 1
,200,
000
Cash 1
,200,
000

2.Toaccr
uet
heunusedvacat
ionweeks
:

Vacati
on pay expense (
400 weeks x
880,
000
P2,200)
Accruedvacat
ionpay 880,
000

PAS 19R,par
agraph 1
3,pr ovi
dest hatan ent
it
yshallrecogni
ze asexpense t
he
expect
edcostoft
heshort
-term benefi
tint
heform ofpai
dabsences.

Nonaccumul
ati
ngpai
dvacat
ionl
eave
1
.Tor
ecor
dtheusedvacat
ionweeks
:

Vacat
ionpayexpense 1
,200,
000
Cash 1
,200,
000

2.Toaccr
uet
heunusedvacat
ionweeks
:

No accr ual i
s necessar
y because nonaccumul
ati
ng pai
d absences are
r
ecognizedwhent heabsencesoccurandl
apsewhentheent
it
lementi
snotused
i
nful
l.
Anot
heri
l
lust
rat
ion
Empl
oyeesar
eeachent
it
ledt
o10wor
kingdaysofpai
dsi
ckl
eavef
oreachyear
.

Unusedsi
ckl
eavemaybecar
ri
edf
orwar
dforonecal
endaryearonl
y.

Si
ckl
eaveistakenoutofanybalancebr oughtfor
wardfr
om t
hepr
evi
ousyearand
t
henoutoft
hecurrentyear
’sent
it
lementonaFI FObasi
s.

OnJanuary1,2019,theaccr
uedsickleavepaywasmeasuredatP20,
000.On
December31
,2019,t
hesickl
eaver
ecordsofempl
oyeesA,BandCareasf
oll
ows:

A B C
Dai
lywage 1
,000 1
,500 2,000
Unusedsickl
eaveonJanuary1,201
9 8 4 2
Si
ckleaveearnedin2019 10 10 1 0
Wageincreaseeff
ecti
veJanuar
y1,201
9 6 6 8
5% 10% 1
5%

A B C
Unusedsickleave-January1,2019 8 4 2
Si
ckleavetakenin2019from previ
ousyear (
6) (
4) (
2)
Si
ckleaveon1 /1/
2019nottaken-forf
eit
ed 2 0 0

Si
ckleaveear nedi
n2019 1
0 10 10
Si
ckleavetakenin2019fr
om cur
rentyear - (
2) (
6)
Unusedsickleave-December31,2019 1
0 8 4

Nothatt
heunusedsickl
eaveofempl
oyeeAonJanuar
y1,201
9is8days.However
,
onl
y6daysaretakenin2019.

Thebal
anceof2dayscannotbecarri
edf
orwar
danymor
ebecauset
hesi
ckl
eavei
s
goodonl
yfort
henextcal
endaryear
.

I
notherwords,themaxi
mum unusedsi
ckleavef
oreachyeari
sonl
y10dayswhi
ch
canbecar
ri
edf orwar
dforonecal
endaryear
.

I
nthecaseofB,t
hesickleavetakeni
s4daysf
rom pr
evi
ousyearand2daysf
rom
201
9oratotal
of6daystaken.

I
nthecaseofC,t
hesickleavetakeni
s2daysf
rom pr
evi
ousyearand6daysf
rom
201
9oratotal
of8daystaken.
Expect
eddai
l
ywage

A (
1,000x1
05%) 1,
050
B (
1,500x110%) 1,
650
C (
2,000x115%) 2,
300

Accr
uedsi
ckl
eavepay–December31
,201
9:

A (
1,050x10days) 1
0,500
B (1,
650x8days) 13,
200
C (2,300x4days) 9,
200

Tot
alaccr
uedli
abi
li
ty-December31,2019 32,
900
Accr
uedsickl
eavepay-Januar
y1 ,2019 20,
000

I
ncr
easei
naccr
uedl
i
abi
l
it
y 1
2,900

Jour
nal
ent
ryonDecember31,2019
Si
ckl
eavepayexpense 1
2,900
Accr
uedsickl
eavepay 1
2,900

Pr
ofi
t-shar
ingandbonuspl
ans
Undersomeprof
it
-shar
ingplans
,employeesshal
lrecei
veshar
eoft
hepr
ofi
tonl
yif
t
heyremainwi
tht
heentityf
oraspeci
fi
edperiod.

Such plans cr
eate a const
ructi
ve obli
gat
ion as employees renderser vi
ce t
hat
i
ncreasesthe amountt o be pai
dift heyremaini n ser
vice unt
ilthe end ofthe
speci
fi
edperiod.

Themeasur
ementofsuchconstr
ucti
veobl
i
gationref
lect
sthepossi
bil
i
tyt
hatsome
empl
oyeesmayl
eavewithoutr
ecei
vi
ngprof
it
-shari
ngpayments.

Recogni
ti
onandmeasur
ement
PAS19R,paragr
aph19,provi
dest
hatanent
it
yshal
lrecogni
zetheexpectedcostof
pr
ofi
tshar
ingandbonuspaymentwhenal
loft
hefol
l
owi ngcondi
ti
onsarepresent
:

a.The ent
it
y has a pr
esentlegalorconst
ruct
ive obl
i
gat
ion t
o make such
paymentasaresul
tofpastevent
.
 b.Ar
eli
abl
eest
imat
eoft
heobl
i
gat
ioncanbemade.

Apresentobl
i
gat
ionexi
stswhent
heent
it
yhasnor
eal
i
sti
cal
ter
nat
ivebutt
omaket
he
payment.

I
l
lust
rat
ion
Aprofi
tshar
ingbonuspl
anrequi
resanenti
tytopayempl oyees5% ofi
ncomeforthe
year
.Theent i
tyr
eport
edincomeofP20, 000,000forthecur r
entyear.Thebonus
paymentist
obemadeatt heendofthefol
lowingyear
.

Jour
nal
ent
ri
es
1
.Tor
ecor
dthebonusi
nthecur
rentyear
:

Bonusexpense(5% x20,
000,
000) 1
,000,
000
Bonuspayabl
e 1
,000,
000

2.Tor
ecor
dthebonuspaymentatt
heendoft
hef
oll
owi
ngyear
:

Bonuspayabl
e 1
,000,
000
Cash 1
,000,
000

Anot
heri
l
lust
rat
ion
Apr ofi
tshar
ingbonusplanrequir
esanentit
ytopay1 0% ofi
ncomefortheyearto
empl oyeeswhoservethroughoutthecur
rentyearandwhowi l
lcont
inuetoserve
thr
oughoutthefol
l
owingyear.

Theenti
tyrepor
tedincomeofP50,000,000fort
hecur
rentyear
.Theent
it
yexpect
s
tosave5% oft hemax i
mum possi
blebonuspaymentthr
oughstaf
ftur
nover
.The
bonuswil
lbepaidattheendoft
hefoll
owingyear
.
Jour
nal
ent
ri
es
1
.Tor
ecor
dthebonusi
nthecur
rentyear
:

Bonusexpense 4,
750,
000
Bonuspayabl
e 4,
750,
000

Maximum possi
blebonus (
10% x50,000,000) 5,000,000
Savi
ngthroughstaf
ftur
nover (
5% x5,000,000) (250,000)
Est
imatedli
abi
li
ty 4,750,000

2.Torecor
dthebonuspaymentattheendoft
hef
oll
owi
ngyear
,assumi
ngt
her
eis
nochangei
ntheest
imatedl
i
abil
it
y:

Bonuspayabl
e 4,
750,
000
Cash 4,
750,
000

Anydiff
erencebetweentheesti
matedli
abi
l
it
yandact
ualpaymenti
saccount
ed
forachangeinaccount
ingest
imateandi
ncl
udedi
nprof
itorl
oss.

Ot
herl
ong-
ter
m empl
oyeebenef
it
s
Thet
erm“
otherl
ong-
ter
m empl
oyeebenef
it
s sar
”i esi
dual
def
ini
ti
on.
Otherl
ong-t
erm employeebenef
it
sareallemployeebenefi
tsot
herthanshor
t-t
erm
employeebenef
it
s,postempl
oymentbenefi
tsandter
minati
onbenef
it
s.

I
not herwords,ot
herl
ong-t
erm employeebenefi
tsareemployeebenef
it
swhi
char
e
notexpectedt obesett
ledwhollywithi
ntwelvemont hsaf t
ert
heendofannual
report
ingperi
odinwhi
chtheemployeesrenderrel
atedser
vice.
Exampl
esofot
herl
ong-
ter
m empl
oyeebenef
it
s
a.Long-
ter
m pai
dabsencessuchasl
ongser
viceorsabbat
ical
leave.

b.Jubi
l
eeorot
herl
ongser
vicebenef
it

c.Long-
ter
m di
sabi
l
it
ybenef
it
s

d.Pr
ofi
tshar
ingbonuses

e.Def
err
edcompensat
ion

Recogni
ti
onandmeasur
ement
Therecogni
ti
onandmeasurementofl
i
abi
li
tyforot
herlong-
ter
m employeebenefi
ts
aret
hesameast her
ecogni
ti
onandmeasurementofdefi
nedbenef
itobl
igat
ion.
I
not herwords,t
heliabi
l
it
yr ecogni
zed f
orotherlong-t
erm empl
oyeebenefi
tsis
equaltot
heexcessofthepresentval
ueoftheli
abi
l
ityovert
hefai
rval
ueoftheplan
asset
sattheendofr
eporti
ngper i
od.
Theonlydif
fer
encei
sther
ecogni
ti
onoft
hef
oll
owi
i
ngcomponent
soft
hedef
ined
benef
itcost
.

Forotherl
ong-t
erm empl oyeebenefi
ts,al
loft
hefol
lowi
ngcomponent
sofdefi
ned
benefi
tcostarerecognizedinpr of
itorlossandincl
udedi
nthecomputat
ionof
employeebenef
itexpense:

a.Cur
rentser
vicecost

b.Pastser
vicecost

c.Anygai
norl
ossonset
tl
ement

d.Neti
nter
estexpenseorneti
nter
esti
ncome

e.Remeasur ements,suchasactuar
ialgai
nsandlosses,t
hediff
erencebet
ween
act
ualreturnonplanassetsandinter
estincome,andthechangeintheeff
ect
ofassetceil
ing.

I
fyourecal
l
,al
lremeas
urementsarer
ecogni
zedf
ull
ythr
oughot
hercompr
ehensi
ve
i
ncomeunderadefi
nedbenef
itpl
an.

Butf
orotherl
ong-
ter
m empl
oyeebenef
it
s,al
lremeasur
ement er
sar ecogni
zedi
n
pr
ofi
torl
oss.
Ter
minat
ionbenef
it
s
Termi
nat
ionbenefi
tsar
eemployeebenefi
tspr
ovidedi
nexchangef
ort
het
ermi
nat
ion
ofanemployee’
semploymentasaresul
tofei
ther:

a.An ent
it
y’s deci
si
on t
oter
minat
e an empl
oyee’
sempl
oymentbef
oret
he
nor
malreti
rementdat
e.

b.An employee’
s deci
sion t
o acceptan of
ferofbenef
it
sin exchange f
or
t
erminat
ionofemployment.

Theeventt
hatgivesri
set
oanobl
i
gat
ioni
sthet
ermi
nat
ionofempl
oymentr
ather
thanempl
oyeeservi
ce.

Anybenefi
tthatmustbeear nedbyworkingf
orafut
ureperiodisnotat ermi
nati
on
benefi
tbecause a terminati
on benef
itisthe di
rectresul
tof t er
mi nat
ion of
employmentandther
efor
eunr el
atedt
othefut
ureemployeeser
vice.

I
notherwords,abenefi
tthati
sinanywaydependentonpr
ovi
dingser
vicei
nthe
f
utur
eisnotater
minat
ionbenef
it
.

Ter
mi nati
onbenef
it
sdonoti ncl
udeempl oyeebenefi
tsr
esult
ingfr
om t er
minat
ionof
employmentattherequestoftheemployeewi t
houtanenti
tyoff
er ,orasaresul
tof
mandat or
yret
ir
ement,becausethesearepostemploymentbenef
its.

However ,t
he dif
fer
ence between t
he benef
itpr
ovi
ded forthe t
erminat
ion of
employmentattherequestoftheemployeeandahigherbenefi
tpr
ovidedatthe
requestoft
heenti
tyi
saterminati
onbenef
it
.

Ter
minat
ionbenef
it
sar
eusual
l
ylumpsum payment
sbutsomet
imesal
soi
ncl
ude:

a.Enhancementofpost
employmentbenef
it
s,ei
therdi
rect
lyori
ndi
rect
lyt
hrough
anemployeebenefi
tpl
an.

b.Sal
aryunti
ltheendofaspecif
iedperi
odiftheemployeer snof
ender urt
her
ser
vicet
hatprovi
deseconomi
cbenefi
tstot
heenti
ty.

Fundament
alpr
inci
ples
Thef
undament
alpr
inci
plesi
nrel
ati
ont
oter
minat
ionbenef
itar
e:

a.Notcondi
ti
onal
onf
utur
eser
vicebei
ngpr
ovi
ded

b.Shor
tper
iodbet
weenof
feroft
ermi
nat
ionandact
ual
ter
minat
ion
Recogni
ti
onoft
ermi
nat
ionbenef
it
s
PAS1 9R,paragraph165,provi
desthatanenti
tyshallr
ecogni
zeanexpenseanda
l
iabi
l
it
yforter
mi nati
onbenef
itsatt
heearl
ieroft
hefol
lowingdat
es:

a.Whent heenti
tycannolongerwit
hdraw t
heofferofthet
erminat
ionbenef
it
s,
forexample,when the pl
an oft er
minat
ion i
s al
ready communicat
ed or
announcedtoaff
ectedemployees
.

b.Whentheent
it
yrecogni
zest
hecostr
est
ruct
uri
ngt
hati
nvol
vest
hepaymentof
t
ermi
nati
onbenef
it
s.

I
mpli
citi
ntherecogni
ti
oncr
it
eri
aist
hatt
her
eneedst
obeanof
feroft
ermi
nat
ion
t
hatbi
ndstheent
it
yinsomeway.

The off
erofterminat
ion i
sthe act
ion oract
ivi
ty deemed t
o gi
ve r
ise t
othe
ter
minati
onl
i
abi
li
ty.

Termi
nat
ioncostst
hatarepartofarestruct
uri
ngplanar
erecogni
zedatt
hesame
ti
meastherecogni
ti
onoftheot
herr
estructur
ingcost
s.

Restructur
ing cost
s are expendi
tur
es t
hat ar
e necessar
il
yi ncur
red f
or t
he
rest
ructuri
ngandnotassoci
atedwit
hongoi
ngacti
vi
ti
esoft
heentit
y.

Forexample,salari
esandbenefi
tsofempl
oyeest
obei ncur
redaf
teroper
ati
ons
ceaseandt hatareassoci
atedwi
ththecl
osur
eofoper
ationsar
eincl
udedinthe
rest
ruct
uri
ngprovisi
on.
Measur
ementoft
ermi
nat
ionbenef
it
s
PAS1
9R,par
agr
aph1
69,pr
ovi
dest
hat
:

a.I
ft heterminati
onbenefi
tsareexpectedtobesettl
edwhol lywithi
nt welve
mont hsaftertheendofreport
ingperi
odinwhichthet er
minati
onbenef i
tis
recognized,the r
equi
rementsf orshor
t-t
erm employee benefi
ts shal
lbe
appli
ed.
Si
mplystat
ed,t
het
ermi
nat
ionbenef
it
sar
emeasur
edatt
heundi
scount
ed
amount
.

b.I
fthetermi
nati
onbenefitsar
eexpectednottobeset
tl
edwholl
ywithintwelve
monthsafterthe end ofrepor
ti
ng per
iod,ther
equi
rement
sf orlong-t
erm
employeebenefi
tsshal
lbeappli
ed.
Si
mply st
ated,t
he ter
minati
on benefi
ts ar
e measur
ed att
he di
scount
ed
amountusi
ngtheappli
cabl
ediscountr
ate.

I
l
lust
rat
ion
The ent
it
yi scommit
ted t
o cl
ose afact
oryin10 monthsand atthatti
me,shal
l
ter
minat
et heempl
oymentofal
ltheremai
ningempl
oyeesoft
hefactory.

Thepl
anoft
ermi
nat
ioni
sasf
oll
ows
:

a.Anempl
oyeel
eavi
ngbef
orecl
osur
eoft
hef
act
oryshal
lrecei
veP1
0,000.

b.Each empl
oyee t
hatrendersser
vice unt
ilt
he cl
osur
e ofthe f
act
oryshal
l
recei
veont
heterminat
iondat
eacashpaymentofP30,000.

c.Ther
ear
e120empl
oyeesatt
hef
act
ory.

d.Theent
it
yexpects20empl oyeest
oleavebef
orecl
osur
eand1
00empl
oyees
tor
enderser
viceunt
il
clos
ur e.

e.Thet
otal
expect
edcashout
fl
owundert
hepl
ani
sdet
ermi
nedasf
oll
ows:

Employeesl
eavi
ngbef
ore
cl
osure (20xP1
0,000) 200,
000
Employeesl
eavi
ngunt
il
closur
e (
100xP30,000) 3,
000,
000

Tot
alcashout
fl
ow 3,
200,
000
Thet
otalamountofP3,200,000shal
lbeaccount oraspar
edf tl
yter
minat
ionbenef
it
s
andpart
lyshor
t-t
erm employeebenef
it
s.
Ast
ermi
nat
ionbenef
it
s
Thebenef
itpr
ovi
dedi
nexchangef
ort
ermi
nat
ionofempl
oymenti
sP1
0,000.

Thi
sistheamountt hatt
heent
it
ywoul
dhavet
opayf
ort
ermi
nat
ingempl
oyment
wit
houtf
utur
eser
vice.

Ter
mi nat
ionbenefi
t 1
0,000
Mult
iplybythetot
alnumberofempl
oyees 120

1
,200,
00
Li
abi
l
it
yfort
ermi
nat
ionbenef
it
s 0

Thi
samountofP1
,200,000shall
bepaidr egar
dlessofwhet
hert
heempl
oyeesl
eave
bef
orecl
osur
eorrenderser
viceunt
il
closure.

Asshor
t-t
erm empl
oyeebenef
it
s
Theincr
ementalbenef
it
sthatemployeesshal
lrecei
vei
ftheyr
enderser
vicesf
ort
he
ful
lt
en-mont
hper i
odarer zedasshor
ecogni t-
term empl
oyeebenef
it
s.
Thei
ncr
ement
albenef
it
sforempl
oyeesl
eavi
ngunt
il
closur
eamountt
oP2,
000,
000.

Tot
alpaymentf or10-monthper
iod 30,
000
Ter
mi nati
onbenef i
t 10,
000
Short
- t
erm employeebenefi
t 20,
000
Mult
iplybyempl oyeesl
eavi
ngunti
lcl
osur
e 100

Shor
t-t
erm empl
oyeebenef
it 2,
000,
000

Theshor
t-t
erm employeebenefi
tmaybeaccr
uedmont
hlyover1
0mont
hsora
mont
hlyexpenseandli
abi
li
tyofP200,
000.