International Accounting Standard 19, Employee Benefits Research Paper

International Accounting Standard 19, Employee Benefits - Research Paper Example This paper will also focus on how to improve the financial reporting regarding the pension benefits and identify the main problems in the current financial reporting system for pension. IAS has issued several directives on employee benefits. Employee benefits can be subdivided into short term, long term, post-employment and termination benefits. The new IAS 19 is a great achievement because it offers many advantages to the employees. On the other hand, it also suffers from certain disadvantages, which can be mitigated in due course of time with suitable amendments. Roadmap: The paper first deals with the IAS 19 frameworks and explains the standards of IAS 19 relating to employee benefits. IAS 19 is the framework for evaluating the employee benefits. Then the paper takes up the controversies in IAS 19 standards relating to various schemes especially pension related issues. The next discussion segment in the paper is the old IAS 19 standards and the latest IAS 19 standards. The last di scussion segment is the latest amendments made in the IAS 19 standards. The papers dwell not only on the latest amendments but also such amendments which have been proposed to be implemented. All specific points relating to the IAS 19 have been stated considered in the paper. Evidences taken to support the ideas projected in the paper have been provided as references. Lastly, appropriate conclusions have been drawn and stated in the paper. Subheadings with specific points supported by evidence The IAS 19 framework: Under the wide term of IAS 19 come all employee benefits which include short term, long term, post employment, retirement, termination and compensation benefits. The short term employee benefits can be categorized as salary and bonus payments, paid and unpaid leaves and other short term non monetary benefits like medical and housing facility etc. The long term benefits include the employee’s long term leave and service benefits. The main aspect in IAS 19 is the pos t employment benefit section or to be more specific, the subject of pension. IAS 19 is the direction provider to post employment and post retirement benefits and pension benefit is one of the most important post employment benefits. Controversies in IAS 19: IAS 19 became a controversial standard and one of the main reasons for this was that the accounting standard for pension was not correctly adhered to. IAS 19 is an accounting standard which covers the reporting of all employee benefits and the most debated topic is the discussion on pensions, especially the employer sponsored, defined benefit pension plans. Pension plans can basically be divided into two categories. It can either be a defined contribution or a defined benefit plan. In the defined contribution plan the employer has to bear a lot of expenses because the unfunded benefits are usually recorded as a liability in the balance sheet. â€Å"Under IAS 19 recommendations, unfunded benefits are to be recorded, as a general rule, as liabilities in the balance sheet of the sponsoring employer. In defined contribution plans, the employer’s annual contribution under the terms of the occupational plan should be recognized as an expense.† (Yermo& Stewart, 2007, P.48). IAS 19 has been subjected to several amendments but still organizations have been incurring high losses due to several reasons. IAS 19 has