On 5 March 2009, the International Accounting Standards Board (Board) published Exposure Draft Proposed Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' and IAS 19 'Employee Benefits'.
Definition of termination benefits
The definition of termination benefits in IAS 19 includes employee benefits that are payable as a result of an employee’s decision to accept voluntary redundancy in exchange for those benefits. The Board proposed that the definition should be amended to clarify that benefits that are payable in exchange for an employee’s decision to accept voluntary redundancy are termination benefits only if they are offered for a short period.
Recognition
IAS 19 states that termination benefits should be recognised when the entity is demonstrably committed either to terminating the employment of employees before the normal retirement date or to providing termination benefits as a result of an offer made in order to encourage voluntary redundancy. The Board proposed that:
- voluntary termination benefits should be recognised when employees accept the entity’s offer of those benefits.
- involuntary termination benefits should be recognised when the entity has communicated its plan of termination to the affected employees and the plan meets specified criteria, unless the involuntary termination benefits are provided in exchange for employees’ future services (ie in substance they are a ‘stay bonus’). In such cases, the liability for those benefits should be recognised over the future service period.
The comment period closed on 28 October 2005.
