CFAS 'government assistance is an action by government designed
PAS 20 to provide an economic benefit specific to an entity or range
GOVERNMENT GRANTS
Define the government grant as assistance by government
in the form of transfer of resources to an entity in return for
part or future compliance with. Certain conditions relating to
the operating activities of the entity
Recognition and measurement
government grant shall be recognized when there is a
reasonable assure that:
a. The entity will comply with the conditions attaching to the
grant
b. The grant will be received.
Govemment grant shall not be recognized on a cash basis as
this not consistent with generally accepted accounting
practice.
Classifications of government grant
 Grant related to asset
 Grant related to income
Accounting for government grant
Government grant shall be recognized as income on a
systematic basis over the periods in which an entity
recognizes as expenses the related costs for which the grant
is intended to compensate
In other words, the grant is taken to income over one or more
periods in which the related cost is incurred.
According to illustration 1:
Grant in recognition of specific expenses shall be recognized
as income over the period of the related expense.
According to illustration 2:
Grant related to depreciable asset shall be recognized as
income over the periods and in proportion to the
depreciation of the relative assets.
According to illustration 3:
Grant related to non-depreciable asset requiring fulfillment
of certain conditions shall be recognized as income over the
periods which bear the cost of meeting the conditions.
According to illustration 4:
A government grant that becomes receivable as
compensation for expenses or losses already incurred or for
the purpose of giving immediate financial support to the
entity with no further related costs shall be recognized as
income of the period in which it becomes receivable.
Presentation pf government grant
1. Government grant related to an assets shall be presented in
the statement of financial position in either of two ways:
 By setting the grant as deferred income.
 By deducting the grant in arriving at the carrying
amount of the asset.
2. Government grant related to income is presented as
follows:
 The grant is presented in the income statement,
either separately or under the general heading "other
income!'
 Alternatively, the grant is deducted from the related
expense.
Government assistance
to entities qualifying under certain criteria.
The essence of government assistance is that no value can
reasonably be placed upon it. Examples of govern ear
assistance are:
 Free technical or marketing advice
 Provision of guarantee
 Government procurement policy that is responsible
for a portion of the entity's sales.
Government assistance does not include the following
indirect benefits or benefits not specific to an entity:
 Infrastructure in development areas such as
improvement to the general transport and
communication network.
 Imposition of trading constraints on competitors.
 Improved facilities such as irrigation for the benefit
of an entire local community.
Disclosures about government grant
A. The accounting policy adopted for government grant,
including the method of presentation adopted in the financial
statements.
B. The nature and extent of government grant recognized in
the financial statements and an indication of other forms of
government assistance from which the entity has directly
benefited.
C. Unfulfilled conditions and other contingencies attaching
to government assistance that has been recognized.
It is not required to disclose the name of the government
agency that gave the grant along with the date of sanction of
the grant by such government agency and the date when cash
was received in case of monetary grant
PAS 19
EMPLOYEE BENEFITS
 Employee benefits are "all forms of consideration
given by an entity in exchange for service rendered
by employees."
FOUR CATEGORIES OF EMPLOYEE BENEFITS
UNDER PAS 19
1. Short-term employee benefits
2. Post-employment benefits
3. Other long-termi employee benefits
4. Termination benefits.
SHORT TERM BENEFITS
Short-term employee benefits are employee benefits (other
than termination benefits) that are due to be settled within I2
months after the end of the period in which the employees
render the related service.
Examples:
1. Salaries, wages, and SSS, PhilHealth and Pag-IBIG
contributions
2. Paid vacation leaves and sick leaves
3. Profit-sharing and bonuses
4. Non-monetary benefits (e.g. free goods and
services)
Recognition and measurement
Accounting for short-term employee benefits is fairly
straightfoward because there are no actuarial assumptions.
- There is no requirement to discount future benefits because
such benefits are all, by definition, payable no later than
twelve months after the end of the current reporting period.
- There is no possibility of actuarial gain or loss because
short-term employee benefits are measured on an
undiscounted basis.
Accounting procedures
The rules for short-torm employee benefite are gasentally an
application of basic accounting principles and practice.
 Unpaid short-term employee benefits at the end of
the accounting period shal be recognized as accrued
expenses.
 Any short-term benefits paid in advance shall be
recognized as a prepayment.
SHORT-TERM COMPENSATED ABSENCES
Accumulating compensated absences are those that are
carried forward and can be used in future periods if the
current period's entitlement is not used in full. Accumulating
compensated absences may either be
1. Vesting - wherein employees are entitled to a cash
payment for unused entitlement on leaving the entity
; or
2. Non-vesting - wherein employees are not entitled
to a cash payment for unused entitlement on leaving
the entity
Non-accumulating compensated absences are those that are
not carried forward. No liability or expense is recognized
until the absences occur, because employee service does not
increase the amount of the benefit.
POST EMPLOYMENT BENEFITS
postemployment. benefils are employee benefits, other than
termination benefits and short-term employee benefits, which
are payable after completion of employment.
Postemployment benefits include:
 Retirement benefits, such as pensions and lump
sum payments on retirement
 Postemployment life insurance
 Postemployment medical care
Most postemployment benefit plans are formal arrangements
between an employer entity and the employees.
These plans are usually established as part of the
remuneration package for the employees.
Some postemployment benefit plans are informal as
evidenced only by the entity's practice to pay
postemployment benefits.
Post employment benefits plans are classified as either:
1. Defined contribution plans
2. Defined benefit plans
ACCOUNTING FOR DEFINED CONTRIBUTION
PLAN
The accounting for defined contribution plans is
straightforward because the reporting entity's obligation for
each period is determined by the amounts to be contributed
for that period. Consequently, no actuarial assumptions are
required to measure the obligation or the expense and there is
no possibility of any actuarial gain or loss.
ACCOUNTING FOR DEFINED BENEFIT PLAN
 The accounting for defined benefit plans is
complex because actuarial assumptions are required
to measure the obligation and the expense and there
is a possibility of actuarial gains and losses.
 Obligations are measured on a discounted basis.
ACCOUNTING PROCEDURES
 The contribution shall be recognized as expense in
the period it is payable.
 Any unpaid contribution at the end of the period
shall be recognized as accrued expense.
 Any excess contribution shall be recognized as
prepaid expense but only to the extent that the
prepayment will lead to a reduction in future
payments or a cash refund.
INSURED BENEFITS
An entity may pay insurance premiums to fund a
postemployment benefit plan.
When an insuranee policy is in the name of a specified plan
participant or a group of participants and the entity does not
have any legal or constructive obligation to cover any loss
on' the policy, the entity has no obligation to pay benefits and
the insurer has sole responsibility for paying the benefits.
the entity shall treat such insurance payments as contribution
to a defined contribution plan.
Components of defined benefit cost
PAS 19, paragraph 120 provides that an entity shall
recognize the following components of defined benefit cost
1. Service cost which comprises:
 Current service cost
 Past service cost
 Any gain or loss on plan settlement
2. Net interest
3. Remeasurements which comprise:
 Remeasurement of plan assets
 Remeasurement of defined benefit obligation
 Remeasurement of the effect of asset ceiling
The service cost and net interest are included in profit or loss
as component of employee benefit expense.
All of the remeasurements are fully recognized through other
comprehensive income and are reclassified subsequently to
retained earnings.
Actually, the defined benefit cost is the amount to be funded
by contribution from the employer.
If the contribution is more than the defined benefit cost, the
difference is prepaid benefit cost during the year.
If the contribution is less than the defined benefit cost, the
difference is accrued benefit cost during the year.
Components of employee benefit expense
a. Current service cost
b.Past service cost
c. Net interest
d.Gain on plan settlement as a deduction Loss on plan
settlement as an addition
Current service cost - is the increase in the present value
of a defined benefit obligation resulting from employee
service in the current period.
Net interest - on defined benefit liability or asset is the
change in the defined benefit obligation, plan assets and asset
ceiling as a result of the passage of time.
The net interest can be viewed as comprising three elements,
namely:
  Interest expense on deferred benefit obligation
 Interest income on plan assets
 Interest expense on effect of asset ceiling
Past service cost - is the change in the present value of the
defined benefit obligation resulting from a plan amendment
or curtailment.
Recognition of past service cost
All past service costs, whether vested or unvested, shall be
recognized as an expense immediately.
Plan assets - compromise assets hold by a long-term benefit
fund and qualifying insurance policy.
A qualifying insurance policy - an insurance policy issued
by an insurer that is not a related party of the reporting entity.
Remeasurement of plan assets
The remeasurement of plan assets is the difference between
actual return on plan assets and interest income on plan
assets.
Remeasurement of projected benefit obligation
The remeasurement of defined benefit obligation is the
recognition of actuarial gain and actuarial loss.
Actuarial gain and actuarial loss are changes in the present
value of the projected benefit obligation resulting from
experience adjustments and the effects of changes in
actuarial assumptions.
Experience adjustments are adjustments from the differences
between the previous actuarial assumptions and what has
actually occurred.
Determination of actuarial gain and loss
The PBO is decreased by:
A. Benefits paid to retirees
B. Actuarial gain
C. Present value of the projected benefit obligation settled
These two items do not appear in the financial
statements.Only the difference between the two is reported
 If the FVPA is more than the PBO, the plan is
overfunded and therefore there is a prepaid benefit
cost, a noncurrent asset.
 If the FVPA is less than the PBO, the plan is
underfunded, and therefore, there is an accrued
benefit cost, a noncurrent liability.
OTHER LONG TERM BENEFITS
 The term "other long-term employee benefits" is a
residual definition.
 Other long-term employee benefits are all employee
benefits other bhail short.term employee benefits,
postemployment benefits and termination benefits.
 In other words, other long-term employee benefits
are employee benefits which are not expected to be
settled wholly within twelve months after the end of
annual reporting period in which the employees
render the related service.
Examples of other long-term employee benefits:
A. Long-term paid absences such as long service or
sabbatical leave
B. Jubilee or other long service benefit
C. Long-term disability benefits
D. Profit sharing and bonuses
E. Deferred compensation

 If the actual benefit obligation is lower than the TERMINATION BENEFITS

estimated amount, there is an actuarial gain.
This means that the projected benefit obligation has
decreased and the decrease is recognized as an
actuarial gain.
 If the actual benefit obligation is higher than the
estimated amount, there is an actuarial loss.
This means that the projected benefit obligation has
increased and the increase is recognized as an
actuarial loss.
Termination benefits are employee benefits provided in
exchange for the termination of an employee's employment
as a result of either
a. An entity's decision to terminate an employee's
employment before the normal retirement date.
b.An employee's decision to accept an offer of benefits in
exchange for the termination of employment.

FVPA
The fair value of the plan assets is the source of fund ea
aside in meeting future benefit payments.

The fair value of plan assets in increased by:

a. Contribution to the plan
b.Actual return ón plan assets

The fair value of plan asset is decreased by:

a. Benefits paid to retirees
b. Realized loss on plan assets
c. Settlement price of benefits settled in advance

PBO
The projected benefit obligation is the present value of
expected future payments required to settle the obligation
arising from employee service in the current and prior
periods.

The PBO is increased by:

A. Current service cost
B. Past service cost
C. Interest expense on PBO
D. Actuarial loss