EMPLOYEE BENEFITS

 Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees and
may be (a) Short-term, (b) Post-employment, (c) Other long-term, or (d) Termination.
 Accumulating compensated absences are those that can be carried over to the next period if not fully used during the
year of entitlement. Non-accumulating are those that expire if not fully used during the year of entitlement.
 Accumulating compensated absences may either be vesting or non-vesting. Vested benefits are monetized; non-vested
benefits are not monetized.
 An entity accrues those accumulating, vesting or non-vesting, compensated absences that are expected to be paid in
cash or taken in the future in which the entity incurs present obligation.
 No liability is accrued for non-accumulating compensated absences. Expense is recognized when absences occur.

1. Bonus before bonus, before tax B = P x Br

 
P
2. Bonus before bonus, after tax B = P -
1 + Br
 
1 - Tr
3. Bonus after bonus, before tax B = P x
1/Br - Tr
 
1 - Tr
4. Bonus after bonus, after tax B = P x 1/Br - Tr +
1

1. According to PAS 19, short-term employee benefits are recognized

a. at each year-end
b. at each month-end
c. on a semi-monthly basis
d. when an employee has rendered service in exchange for those benefits.

2. According to PAS 19, contributions to a defined contribution plan are recognized

a. at each year-end
b. when an employer makes those contributions.
c. when an employee has rendered service in exchange for those contributions.
d. at the beginning of each reporting period.

3. These are employee benefits (other than termination benefits) which are payable after the completion of employment
a. Short-term c. Share-based
b. Other long-term d. Post-employment

4. Post-employment benefit plans may be

a. Defined contribution plan c. State plan
b. Defined benefit plan d. a or b

5. It is a type of retirement plan where the benefit to be received by the employee is dependent on the contributions
made to the plan and on the investment performance of the plan. The risk that the benefits to be received may be
insufficient is retained by the employee.
a. Defined contribution plan c. Leche plan
b. Defined benefit plan d. a or b

6. It is a type of retirement plan where the employer assures a definite amount of benefit to be received by the employee.
The risk that funds needed to pay the agreed benefits may be insufficient is retained by the employer.
a. Defined contribution plan c. Plan vs. zombies
b. Defined benefit plan d. a or b

7. Where a post-employment benefit plan contains characteristics of both defined contribution and defined benefit, the
plan is considered to be
a. Defined contribution plan c. High breed plan
b. Defined benefit plan d. a or b

8. It refers to a plan where both the employer and employee contribute to a retirement fund.
a. Contributory plan c. Funded plan
b. Non-contributory plan d. Chip-in plan

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9. It refers to a plan where only the employer contributes to a retirement fund.
a. Contributory plan c. Unfunded plan
b. Non-contributory plan d. Libreko plan

10. It refers to a plan where plan assets are transferred to a trustee who assumes obligation of managing the fund and
disbursing funds to retiring employees.
a. Funded plan c. Unfunded plan
b. Non-contributory plan d. Outsourcing plan

11. It refers to a plan where plan assets, if any, are retained and managed by the employer.
a. Funded plan c. Unfunded plan
b. Non-contributory plan d. Delicate plan

12. These are pool of assets contributed by various unrelated employers to be used to pay retirement benefits to
participants without regard to the identity of the contributing employers.
a. Multi-employer plans c. Pooling of assets plan
b. State plans d. Secret plan

13. Multi-employer plans are treated as

a. Defined contribution plan c. Hybrid plan
b. Defined benefit plan d. a or b

14. These are established by legislation and are operated by a government agency which is not subject to control or
influence by the reporting entity.
a. State plans b. SSS c. GSIS d. Puro plan

15. State plans are

a. accounted for as defined contribution plan
b. accounted for as defined benefit plan
c. accounted for in the same way as multi-employer plans
d. accounted for only by the Commission on Audit

16. The accounting for defined contribution plan

a. is straightforward – actuarial computations are not required.
b. is complex – actuarial computations are required
c. is simple – not accounted for
d. is done only by CPAs

17. Under a defined contribution plan, the retirement benefits expense is

a. equal to an actuarially determined amount
b. equal to the agreed periodic contribution to the fund
c. equal to the contribution made during the period
d. zero, if no employee retired during the period

18. Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees.
Which of the following employee benefits is not within the scope of PAS 19?
a. Short-term d. Termination
b. Post-employment e. Share-based payments
c. Other long-term
19. Which of the following employee benefits is not within the scope of PAS 19?
a. Semi-monthly salaries of employees
b. Employer’s share in SSS contributions
c. One sack rice allowance
d. Bonus in the form the entity’s shares

20. Accumulating compensated absences are those that

a. can be carried over to the next period if not fully used during the year of entitlement.
b. expire if not fully used during the year of entitlement.
c. can be carried over to the next period if not fully used during the year of entitlement and are paid in cash when the
employee leaves the company
d. are recognized only when actually taken by employees

Problems
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Short-term employee benefits
1. WASTREL SPENDTHRIFT Co. pays salaries twice a month and does not pay salaries in advance. Employees work
five days a week and compensation are computed on these working days. In December 20x1, WASTREL Co. paid the
second semi-monthly salaries on December 26 which falls on a Friday. The next non-working holiday is on New
Year’s Day. WASTREL has 100 employees who earn ₱4,000 per day. WASTREL’s cost accountant identified that
70% of salaries incurred pertain to the production of goods. How much is the accrued salaries as of December 31,
20x1?
a. 360,000 b. 840,000 c. 1,600,000 d. 1,200,000

Sick leave
2. An entity has 100 employees, who are each entitled to five (5) working days of paid sick leave for each year. Unused
sick leave may be carried forward for one calendar year. Sick leave is taken first out of the current year’s entitlement
and then out of any balance brought forward from the previous year (a LIFO basis). At December 30, 20x1, the
average unused entitlement is two days per employee. The entity expects, based on past experience which is expected
to continue, that 92 employees will take no more than five days of paid sick leave in 20x2 and that the remaining 8
employees will take an average of six and a half days each. The average salary per day, per employee in 20x1 is
₱4,000 and it is not expected to change in 20x2. How much is the accrued salaries as of December 31, 20x1?
a. 24,000 b. 48,000 c. 208,000 d. 0

Vacation leave – accumulating, vesting

Use the following information for the next two questions:
ANOMALOUS IRREGULAR Co. grants its employees twelve days paid vacation leave each year. Per ANOMALOUS’s
policy, employees are required to take vacation leave each year, but not necessarily for their entire vacation leave
entitlement. Vacation leaves not taken during a year can be carried over indefinitely.

ADHERE has 500 employees with an average salary of ₱4,000 per day. The average annual pay increase is 5%. During
20x1, total vacation leaves taken by employees were 5,400 days. Based on past experience, 90% of unused vacation leave
for a year are taken in the immediately following year.

Case #1: Vesting and accumulating

3. Assume that unused vacation leaves vest, how much should ANOMALOUS accrue as liability for unused vacation
leave on December 31, 20x1?
a. 2,520,000 b. 25,200,000 c. 2,268,000 d. 0

Case #2: Nonvesting and accumulating

4. Assume that unused vacation leaves do not vest, how much should ADHERE accrue as liability for unused vacation
leave on December 31, 20x1?
a. 2,520,000 b. 22,680,000 c. 2,268,000 d. 0

Bonus computation
Use the following information for the next four questions:
ADHERE TO STICK Co. grants its managerial employees bonus in the form of profit sharing. Information on operations
in 20x1 is shown below:
Profit before tax ₱4,000,000
Bonus rate or percentage 10%
Income tax rate 30%

5. How much is the bonus “before bonus and before tax?”

a. 363,636 b. 280,000 c. 400,000 d. 288,660

6. How much is the bonus “after bonus and before tax?”

a. 400,000 b. 363,636 c. 261,684 d. 245,798

7. How much is the bonus “before bonus and after tax?”

a. 363,636 b. 261,684 c. 245,798 d. 288,660

8. How much is the bonus “after bonus and after tax?”

a. 363,636 b. 261,682 c. 245,798 d. 288,660

Bonus computation

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9. ARTIFACT MAN MADE OBJECT Co. provides an incentive compensation plan under which its president receives a
bonus equal to 10% of ARTIFACT’s profit before tax but after deduction of the bonus. ARTIFACT’s profit after tax
and after bonus for the year is ₱2,545,456. Income tax rate is 30%. How much is the bonus?
a. 245,798 b. 261,684 c. 363,636 d. 288,660

Defined contribution plan

Use the following information for the next two questions:
AMNESTY PARDON Co. has a post-employment benefits plan that is considered as defined contribution plan.
According to the plan, AMNESTY agrees to contribute ₱800,000 annually to a retirement fund for the benefit of its
employees.

On December 31, 20x1, because of poor results of operations and insufficient working capital, AMNESTY was only able
to contribute ₱320,000 to the fund. On December 31, 20x2, because of a profitable year, AMNESTY decided to
contribute ₱1,800,000 to the retirement fund. On January 12, 20x3, an employee retired and was eligible to a ₱60,000
retirement benefits based on the operating efficiency and investment earnings of the fund.

10. How much is the retirement benefits expense recognized in 20x2?

a. 800,000 b. 320,000 c. 1,800,000 d. 60,000

11. How much is the retirement benefits expense recognized in 20x3?

a. 800,000 b. 320,000 c. 1,800,000 d. 60,000