New employee benefits and termination benefit - Financial impact and required disclosures

*Source SNG Grant Thornton

Please note that every effort has been made to ensure that the advice given in this educational material is correct. Nevertheless, that advice is given purely as guidance readers to assist them with particular problems relating to the subject matter of the educational material, and African Venture Group will have no responsibility to any person for any claim of any nature whatsoever that may arise out of, or relate to, the contents of this educational material.

New employee benefits and termination benefits

In response to the COVID-19 pandemic, some entities are providing additional benefits to their employees such as:

• paying them during a temporary shutdown of their operations, or while they are sick or in mandatory quarantine; and/or

• providing other compensation to assist employees with working remotely.


If an entity decides to provide new benefits to its employees (ie those that were not previously offered), it must determine how to account for the benefits. The financial support or benefits offered to employees will likely meet the definition of a liability; therefore, an entity will need to consider when to recognise the liability/expense and how it should be measured.


The entity must first determine whether the benefits provided are a result of past service or if they will be provided as services are rendered because that will impact when the liability is recognised. The specific guidance in IAS 19 ‘Employee Benefits’ must be considered when making this determination. Generally, a liability is incurred once a past transaction has occurred and the entity has lost the discretion to avoid the obligation.


Furthermore, as a result of difficult economic conditions, some entities have or will downsize their workforce. If the entity offers or is required to pay termination benefits to the affected employee(s), management must consider how and when to account for the liability/expense in accordance with IFRS.

African Venture Group

1 Nollsworth Crescent, Umhlanga, Durban, 4051

 

National:

078 115 6607

International:

+27 78 115 6607

Email: info@africanventuregroup.co.za

B-BBEE level 2 rating

  • LinkedIn
  • Facebook
Contact Us

© by African Venture Group