sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
ICAI »
  Important Announcement - Advanced ICITSS - Advanced IT Test
 ICAI enters into an arrangement with Taxmann Allied Services Private Limited to provide the contents of its website (Income tax module only) at subsidised price to the members of ICAI
 Extension of Last Date of Multipurpose Empanelment Form for the Year 2018-19
  Educational Material on Indian Accounting Standard (Ind AS) 115, Revenue from Contracts with Customers
 Introduction of Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) for Scheduled Co-operative Banks
 RBI-Investments in Non-SLR Securities by Primary (Urban) Co-operative Banks – Approved counterparties for secondary market transactions
 Exposure draft of ASLB 23, 'Revenue from Non-Exchange Transactions (Taxes and Transfers)'
 Launch of Batch of Educational Course by ICAI Registered Valuers Organsiation (ICAI RVO) at Coimbatore from 25th August, to 16th September, 2018.
 Announcement for the "Multipurpose Empanelment Form 2018-19"
 Multipurpose Empanelment Form for the year 2018-19 For Practicing Chartered Accountants
 CPE Events 13th August - 18th August 2018

FAQ on accounting treatment of increase in liability due to enhancement of the gratuity ceiling.
May, 15th 2018
FAQ on accounting treatment of increase in liability due to enhancement of the gratuity
ceiling

This FAQ on accounting treatment of increase in liability on account of enhancement of the
gratuity ceiling from Rs. 10 lakhs to Rs. 20 Lakhs due to Payment of Gratuity (Amendment)
Act 2018 (vide notification no. S.O. 1420 (E) dated March 29, 2018) has been issued by the
Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India
(ICAI). The purpose of this FAQ is to clarify the accounting treatment of increase in liability
due to enhancement of the gratuity ceiling.
Question: ABC Ltd. is covered by the Payment of Gratuity Act, 1972 which is required to pay gratuity to its employees. Due to the recent amendment in the aforesaid Act there is substantial increase in the liability of the company. Whether there is any exemption or relief available to the company under Accounting Standards with regard to the accounting treatment of such increase in the liability. Response: The Gratuity benefit is an employee benefit and accordingly any increase in company's liability due to enhancement of the gratuity ceiling from Rs. 10 Lakhs to Rs. 20 Lakhs would be accounted for as per the principles of AS 15, Employee Benefits or Ind AS 19, Employee Benefits, as the case may be. In this regard, it may be noted that effect of above type of amendments need to be dealt with reference to accounting treatment of past service costs.The `past service cost' is defined as below in AS 15 and Ind AS 19:
As per AS 15, "Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past service cost may be either positive (where benefits are introduced or improved) or negative (where existing benefits are reduced)". As per Ind AS 19 "past service cost, which is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting from a plan amendment (the introduction or withdrawal of, or changes to, a defined benefit plan) or a curtailment (a significant reduction by the entity in the number of employees covered by a plan)". As per the above, the increase in liability arising due to enhancement of gratuity ceiling from 10 to 20 Lakhs is a past service cost. It may also be noted that the aforementioned accounting standards do not provide any exemption/one time relief with regard to the accounting treatment of increase in liability arising on account of past service cost. Accordingly, ABC Ltd. is required to account for any increase in the liability on account of increase in gratuity ceiling as expense as per the requirements of the relevant applicable Standard.
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Multi-level Marketing MLM India Affiliate Marketing Affiliate Marketing Software MLM Software MLM Solutions Multi level marketing solutions MLM Servi

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions