ContentsØ  Applicability & NatureØ  Meaning of Employees Benefits & Types of BenefitsØ  Accounting Treatments Applicability & Nature            Applicable       :           01-04-2006            Nature             :           Mandatory for Level – 1 Note: In addition to Level 1, if any enterprise is having more than 50 employees then such enterprise will also be covered under the applications of AS – 15. Meaning of Employees Benefits            Employees benefit shall include all the expenses which are incurred by the enterprise for the benefits of employees or for relatives of employees. As per AS – 15, two types of benefits should be covered for accounting purpose. Types of Benefits Short Term Benefits            Short term benefits are the payments which are expected to be settled in the same period of service or within twelve months after balance sheet date. The following types of amount can be included under the heading of short term benefits.(a)                                                                                  Wages & Salaries(b)                                                                                 Profit Sharing / Bonus(c)                                                                                  Leave Encashment(d)                                                                                 Non – Monetary Benefits (Car, Housing, Medical etc) Accounting of Short Term Benefits(a)                Wages & salaries: Amount of wages & salaries should be written off in P&L a/c equal to amount of service used by enterprise during the period. Difference between actual payment & value of service should be considered as prepaid expenses or outstanding expenses. (b)               Profit sharing / Bonus: If any bonus or profit is payable by the enterprise to its worker as per the agreement then payable amount should be provided in P&L a/c of same year.If any payment is based on the condition of continuation of service during the particular period then provision for payment should not be required for those workers or employees that are not in continuation in service. (c)                Leave Encashment: If any employee is allowed leaves with pay then accumulation and non accumulation will be considered.Accumulation Leaves: It may be possible that employee has not used the entire benefit which is provided by the company during the period. In such case the unused benefit should be carried forward and to be added to the allowed benefit of next year. Value of unused benefit should be provided by creating a provision & amount of used benefit should be written off in P&L a/c.Non Accumulation Leaves: If any leave encashment is in the nature of non accumulation then value of unused benefit should not be carried forward to the next year & no provision is required for such unused benefit. Amount of used benefit should be considered as an expense of the same accounting period. (d)               Non – Monetary Benefits: Value of non monetary benefits which are provided by company to its employees or worker should be written off in the same accounting period of the benefit provided. Long Term Benefits Multi Employer Plans            Multi Employer plans are formed by two or more employers for the benefits of their employees. If any contribution is made by any employer during the period under the specified plans then amount of contribution should be written off in the same period. Insurance Plans            If any employer has invested in the insurance plans for the retirement of employees then amount of premium paid should be considered as a normal expense and to be written off in the same period. State Plans            If any plan is to be created as per Govt guidelines whether State Govt or Local Govt then amount of contribution should be written off in the same accounting period.

 

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