Employee Benefits, Share-based Payment and Provisions (Ind AS 19, 102, 37, 29)
Ind AS 19, 102, 37 and 29 deal with long-term obligations, share-based awards and uncertain liabilities.
Core rules
- Ind AS 19: the defined benefit obligation uses the projected unit credit method; discount at a high-quality corporate bond yield (government bond where no deep market). Service cost and net interest go to P&L; remeasurements go to OCI and are not recycled.
- Past service cost is recognised when the plan amendment occurs.
- Ind AS 102: equity-settled awards are measured at grant-date fair value and spread over the vesting period; cash-settled awards are remeasured at each reporting date. Market conditions are reflected in fair value; service and non-market performance conditions adjust the number of awards.
- Ind AS 37: recognise a provision for a present obligation from a past event, probable outflow and reliable estimate; use the best estimate, discounted where material. Onerous contracts and restructuring need specific criteria.
- Ind AS 29: in hyperinflation, restate non-monetary items by a general price index; monetary items are not restated; recognise net monetary gain or loss in P&L.
Worked example
A company grants 1,000 options with fair value ₹30 each, vesting over 3 years. Annual expense = 1,000 × 30 / 3 = ₹10,000. If employees leave and expected vesting falls to 900 options, cumulative expense becomes 900 × 30 = ₹27,000, adjusted prospectively.
Traps
- Recycling defined benefit remeasurements through P&L.
- Using the closing share price for equity-settled grants.
- Discounting a provision at a pre-tax rate that ignores risk.
- Forgetting to restate inventories and PPE under Ind AS 29.