Employee Benefits

  • Employee Benefits

    Project Status

    IPSAS 25, Employee Benefits, published.


    John Stanford

    Objective(s) of project

    The objective of the project is to produce accounting guidance for employee benefits, including short-term benefits, post-retirement benefits, other long-term benefits and termination benefits based on IAS 19, Employee Benefits.


    The project applies to all public sector entity employers (except Government Business Enterprises (GBEs)), in accounting for all employee benefits, except share based transactions, under the accrual basis of accounting.

    GBEs are required to apply International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB).


    Expenses and liabilities related to employee benefits is significant for most public sector entities. As such, an IPSAS is considered necessary.

    Previously no project was started as it was anticipated that there might be fundamental changes to the sections of IAS 19 dealing with post-employment obligations.

    Further, resource limitations meant progressing a project on Social Policy Obligations was a priority. In 2003 consideration was given to a project dealing with only short-term benefits, but was not actioned.

    November 2005 - With the availability of resources a project on employee benefits was initiated.


    Issues the project includes (but are not necessarily limited to):

    • Scope - should it include all the components addressed by IAS 19: short-term benefits, post-employment benefits, other long-term benefits and termination benefits;
    • The definition of, and requirements relating to, composite social security programs which operate to provide post-employment benefits as well as to provide benefits in non-exchange transactions;
    • The appropriate discount rate for discounting post-employment benefit obligations reflecting the time-value of money, but neither the risks associated with those obligations nor entity specific credit risk;
    • Retention of the IAS 19 "corridor" approach for the treatment of actuarial gains and losses;
    • Disclosures; and
    • Implementation arrangements.

    Task Force progress / Board discussions to date

    January 2008: IPSAS 25, Employee Benefits published.

    November 2007: The IPSASB approved IPSAS 25, Employee Benefits. In doing so, the IPSASB agreed that:

    • The IPSAS should include a rebuttable presumption that long-term disability benefits are not subject to the same degree of uncertainty as post-employment benefits. Where this presumption is rebutted an entity may account for such benefits on the same basis as for post-employment benefits; and
    • The rationale for, and need for, insertion of an additional paragraph in a section dealing with entities participating in plans under common control was accepted. It was agreed that, rather than adopting a permissive approach, this paragraph should reflect the principle that, where the ultimate obligation for a defined benefit plan lies with the controlling entity, it is inappropriate for controlled entities to report on a defined benefit basis. This section of the draft IPSAS is to be titled Defined Benefit Plans where the Participating Entities are Under Common Control.

    IPSAS 25 is planned to be issued early in 2008.

    July 2007: The IPSASB reviews an analysis of submissions on ED 31 Employee Benefits and directs staff to prepare a draft of an IPSAS based on the ED. Directions include carrying out further work, in consultation with members and technical advisors, on the terminology for the appropriate discount rate for discounting post-employment benefit obligations.

    October 2006: ED 31, Employee Benefits issued with a comment date of February 28, 2007.

    September 2006: ED 31, Employee Benefits approved for issue.

    March 2006: IPSASB reviews a first draft of an ED agreeing:

    • It should permit full recognition of actuarial gains and losses in the Statement of Net Assets/Equity;
    • The proposed approach to state plans and the insertion of requirements and commentary related to composite social security schemes appropriate;
    • No public sector reason for deleting sections on "Insurance Benefits," which mirror IAS 19;
    • To consult the Organisation for Economic Co-operation and Development's Pension Committee and other experts on a discount rate; and
    • IAS 19 disclosures relevant in the public sector.

    November 2005: The IPSASB reviews a paper that IAS 19 is relevant to the public sector though highlighting some issues for consideration in a public sector context. It was decided to develop an ED of an IPSAS based on IAS 19, tentatively agreeing:

    • It should address all aspects of IAS 19, including short-term employee benefits, other long-term benefits and termination benefits as well as post-employment benefits;
    • There is no rationale for excluding unfunded employee schemes from its scope;
    • Further consideration be given to obligations related to public sector employees covered by contributory social security schemes;
    • For the purpose of discounting obligations, a rate related to the yield on government bonds should be used subject to further consideration with possibility of seeking expert opinion;
    • No public sector specific reason to deviate from IAS 19 by eliminating "the corridor" approach (which permits entities to defer recognition of actuarial gains and losses that do not exceed specified parameters), but to be considered further at future meetings; and
    • A project to develop an IPSAS based on IAS 26, Accounting and Reporting by Retirement Benefit Plans, should be added to the work program, but not as a high priority.


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