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AASB 119 - Employee Benefits
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Summary 
Developments, Key Differences & History 
Compared to IFRS 
Interpretations 
Rejection Notices 
Questions & Answers 
Articles 
AASB website 

 
Currency of material 
This material was last updated in August 2008.  
 
Overview 
AASB 119 Employee Benefits is equivalent to IAS 19 of the same name as issued by the International Accounting Standards Board. The objective of AASB 119 is to prescribe the accounting and disclosure for employee benefits. It is applicable for annual reporting periods beginning on or after 1 January 2005. 
 
 
SUMMARY 
Main Requirements 
The main requirements of AASB 119 are:  
 
Application and Scope (paragraphs Aus1.1-6) 
AASB 119 must be applied by employers to account for all employee benefits, except those to which AASB 2 Share-based Payments applies. Employee benefits include:
  • Short-term benefits, such as wages, salaries, paid annual leave, bonuses and non-monetary benefits, such as medical care, housing, cars and free/subsidised goods or services.
    •  
  • Post-employment benefits, such as pensions and post-employment medical care.
    •  
  • Other long-term benefits, such as long-service leave, sabbatical leave and deferred compensation.
    •  
  • Termination benefits.
    •  
  • Benefits provided to the spouse, children or dependants of employees.
Definitions (paragraph 7) 
Definitions include employee benefits, fair value, other long-term employee benefits, short-term employee benefits and termination benefits. 
 
Short-term Employee Benefits (paragraphs 23)
  • When an employee has rendered service to the entity during the reporting period, recognise the undiscounted amount expected to be paid in exchange for those services as an expense.
    •  
  • The expected cost of short-tem compensated absences is recognised as an expense:
    • when the service is rendered increasing the employee’s entitlement to benefits for accumulating compensated absences; and
      •  
    • when the absences occur for non-accumulating compensated absences.
  • Profit-sharing and bonus payments are recognised as an expense when:
    • the entity has a present legal or constructive obligation as a result of past events and
      •  
    • a reliable estimate can be made of the obligation.
  • A liability is recognised for any unpaid short-term benefits.
Post-employment Benefits: Distinction between Defined Contribution Plans and Defined Benefit Plans (paragraphs 24-42)
  • Classified as either defined contribution or defined benefit plans.
    •  
  • Defined contribution plans are those where an employer pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further contributions. The employee bears the actuarial risk and investment risk.
    •  
  • Under a defined benefit plan, the employer is obliged to provide agreed benefits to current and former employees and generally bears the actuarial risk and investment risk.
Post-employment Benefits: Defined Contribution Plans (paragraphs 43-47)
  • Contributions payable are recognised as an expense as the employee renders service to the entity.
    •  
  • An entity must disclose the amount recognised as an expense for defined contribution plans.
Post-employment Benefits: Defined Benefit Plans (paragraphs 48-125)
  • Accounting for defined benefit plans involve the following steps:
    1. Using actuarial techniques to estimate the benefit employees have earned in return for their service in the current and prior periods.
      2.  
    2. Discounting that benefit using the projected unit credit method to determine the present value of the defined benefit obligation and the current service cost.
      3.  
    3. Determining the fair value of any plan assets.
      4.  
    4. Determining the total amount of actuarial gains and losses, and the amount required to be recognised.
      5.  
    5. Where a plan has been introduced or amended, determining the past service cost.
      6.  
    6. Where a plan has been curtailed or settled, determining the resulting gain or loss.
  • The amount recognised as a defined benefit liability, is the net total of the following:
    • The present value of the defined benefit obligations at the reporting date, based on actuarial assumptions
      •  
    • Minus the fair value of any plan assets (from which the obligation will be settled) at the reporting date
      •  
    • Plus actuarial gains (less actuarial losses) not recognised
      •  
    • Minus any past service cost not yet recognised.
  • The net of the following amounts must be recognised in profit or loss:
    • Current service cost
      •  
    • Interest cost
      •  
    • The expected return on any plan assets and any reimbursement rights
      •  
    • Actuarial gains and losses
      •  
    • Past service cost
      •  
    • The effect of any curtailments or settlements
Other Long-term Employee Benefits (paragraphs 126-131)
  • Recognise a liability for other long-term benefits equal to:
    1. the present value of the defined benefit obligation at reporting date
      2.  
    2. minus the fair value of any plan assets at the reporting date.
  • Recognise as expense or income the net total of specified amounts including:
    1. current service cost
      2.  
    2. interest cost
      3.  
    3. actuarial gains and losses
      4.  
    4. past service costs
Termination Benefits (paragraphs 132-143)
  • Recognise a liability and an expense for termination benefits when the entity is demonstrably committed to either:
    1. terminate the employment of employee(s) before the normal retirement date; or
      2.  
    2. provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.
  • An entity is demonstrably committed to a termination when and only when it has a detailed formal plan for the termination and is without realistic possibility of withdrawal.
    •  
  • Where termination benefits fall due more than12 months after the reporting date, they must be discounted using the discount rate described above.
Appendices 
Appendix A – Illustrative example 
Appendix B – Illustrative disclosures 
Appendix C – Illustration of the application of paragraph 58A 
 
 
The information provided is a brief summary of the requirements of this standard and is not intended to be used as a substitute for reading the standard itself nor does it attempt to provide any interpretative advice. To apply the standard to their particular circumstances readers are encouraged to read the text of the standard and, if necessary, seek professional advice from a Chartered Accountant or other suitably qualified professional. The Institute expressly disclaims all liability for any loss or damage arising from reliance upon any information or inaccurate statement made in this summary.