Interpretation and Application of IPSAS

Annex 3: Employee Benefits: An Overview of the Key Principles

3.1 Short-term Employee Benefits

Short-term employee benefits are those that fall due wholly within 12 months after the end of the period in which the employee renders the related service.

The expense and liability recognized should be the undiscounted amount.

3.2 Post-Employment Benefits

Post-employement benefits plans can be split between two types, namely defined contribution plan and defined benefit plan.^1Source:

Defined contribution plan

Defined benefit plan1

With a defined contribution plan an entity makes fixed contributions into a separate entity and the entity will carry none of the actuarial or investment risks. The entity will only recognize a liability or asset if these contributions are in arrears or in advance respectively. The liability or asset is not discounted, except where it does not fall due wholly within 12 months.

With a defined benefit plan an entity provides employees with the agreed benefits of the plan and the entity carries all the actuarial and investment risks. The obligation is measured on a discounted basis because the liability may be settled many years after the employees render the related service. To simplify the measurement of the obligation for an entity, they will obtain a valuation from a qualified valuator. The valuation report will then be utilized for all the recognition and disclosure requirements.

The accounting treatment of multi-employer and state plans depends ...