International Accounting Standard 19 (IAS 19) defines post-employment benefits as “employee benefits (other than termination benefits) which are payable after the completion of employment”.
Employee benefits are all forms of consideration that is given by an entity to its employees in exchange for services rendered by the employees. Employee benefits include benefits provided to either employees or their dependants. Employee benefits can be settled by either cash payments or by the provision of goods or services. The employee benefits can be settled by payment either directly to the employees, to their spouses, children or other dependants or to others, such as insurance companies.
Post-employment benefits are one of the types of employee benefits. They are the benefits which will need to be paid after the employee has completed his/her employment. The examples of post employment benefits include pensions, other retirement benefits, post-employment life insurance and post-employment medical care.
It should be noted that the termination benefits are not considered to be the post-employment benefits. The termination benefits are employee benefits payable as a result of either an entity’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept voluntary redundancy in exchange for those benefits. The termination benefits to encourage employees to leave service voluntarily.
The post-employment benefits are attributed to the periods in which the obligation to provide post-employment benefits arises. The obligation to provide post-employment benefits arises as the employees render services in return for post-employment benefits which an entity expects to pay in future reporting periods. Actuarial techniques are used to measure this obligation with sufficient reliability to justify recognition of a liability.
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 should reflect expected changes in such variables. This can be done on the basis of past history and other reliable evidence.
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