Nanyang Technological University

Nanyang Business School

AC2101 – Accounting Recognition and Measurement

Semester 2, 2020-21

Outline for Seminar 12: Employee Benefits

Learning objectives:

➢ Examine and apply employee benefits accounting under SFRS(I) 1-19

➢ Review topics covered in AC2101

Required readings:

• SFRS(I) 1-19 (excluding paras related to defined benefit post-employment plans)

• NCKL FRS 19

Pre-seminar requirements:

• Go through the required readings

• Go through videos and activities on LAMS
• Read the attached illustrations
• Prepare for the in-class activities

In-class activities: Self practice problem 4:

> how to get 20,462?

• Responseware
method 1:
2.8 mil / (80 employees x 260 days) = 134.62
134.62 x 76 employees - previously recognised = 20,462

mehod 2:
(2.8 mil * 95%)/ 260; total number of working days x 2 days

1
Write-ups and illustrations:
The following illustrations are adapted from illustrative examples from SFRS(I) 1-19.

Illustration 1: Short-term Paid Absences

FB Limited is in its first year of operation and has 100 employees, who are each entitled
to 20 days of paid annual leave each year. Unused annual leave may be carried forward
for one calendar year. Paid leave is first taken out of the prior year’s entitlement carried
forward before using the current year’s entitlement. As at 31/12/20x1, the average
unused entitlement is 2 days per employee (i.e. a total of 200 days).
Therefore, the entity recognises a liability equal to 200 days of paid leave. Assuming
each day of paid leave costs the entity $100, the entity will pass the following journal
entry for the year ending 31/12/20x1:
reduce staff cost in following years
Dr Staff Costs $20,000
Cr Provision for short-term paid absences $20,000

Illustration 2: Profit-sharing and Bonus Plans

The employment contracts that FB Limited (which has 31 December accounting year-
ends) entered into with its employees contain a clause that requires FB Limited to pay
its employees a 13th month bonus amounting to $1,000 in January the following year.
In this case, FB Limited has a legal obligation to pay the 13th month bonus. Therefore,
at each year-end, FB Limited will have to make a provision for the 13th month bonus.

Dr Staff Costs $1,000

Cr Bonus Payable $1,000

Illustration 3: CPF Contributions by Employer

ABC Limited (which has 31 December accounting year-ends) contributes 17% of its
employees’ salaries to the Central Provident Fund (CPF) on a monthly basis. The
employees have a total monthly salary of $10,000. As of 31/12/20x1, the company
makes the following provision for its December CPF contribution to be paid in January.

Dr Staff Costs $1,700 CPF: defined contribution plan

Cr CPF Payable $1,700