ACCOUNTING STANDARD 15

Its Relevance to GRC

BY

TULIKA JEENDGAR
PGDM
UNIVERSAL BUSINESS SCHOOL

Q) The candidates can send me a note on accounting standard AS-15, its relevance to GRC in
advance of the second round.

ACCOUNTING STANDARD:
DEFINITION:
Accounting Standard is defined as a principle that guides and standardizes accounting practices.
In order to ensure transparency, consistency and reliability of financial reporting it is essential to
standardize the accounting principles and policies. Accounting Standards provide framework and
Standard accounting policies so that financial statements of different enterprises become comparable.
The Accounting Standards board of the Institute of Chartered Accountants of India (ICAI) formulates
Accounting Standards to be established by the Council of ICAI.
Issues dealt by Accounting Standards:

Recognition of events and transactions in financial statements.

Measurements of these events and transactions.
Presentation of transactions and events in the financial statements in a manner that is
meaningful and understandable to the reader.

Objectives:
The main objective of Accounting Standards is to establish standards which have to be compiled with, to
ensure that financial statements are prepared in accordance with generally accepted measurements.
These standards harmonize the diverse accounting policies and practices at present in India.
According to Government of India there are 32 Accounting Standards
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

AS 1- Disclosure of Accounting Policies

AS 2- Valuation of Inventories
AS 3- Cash Flow Statements
AS 4- Contingencies and Events occurring after the Balance Sheet Date
AS 5- Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies
AS 6- Depreciation Accounting
AS 7-Construction Contracts (revised 2002)
AS 8- Accounting for Research & Development
AS 9- Revenue Recognition
AS 10- Accounting for Fixed Assets
AS 11- The Effects of changes in Foreign Exchange Rates (revised 2003)
AS 12- Accounting for Government Grants
AS 13- Accounting for Investments
AS 14- Accounting for Amalgamations
AS 15- Employee Benefits (revised 2005)
AS 16- Borrowing Costs
AS 17- Segment Reporting
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18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.

AS 18- Related Party Disclosures

AS 19- Leases
AS 20- Earnings Per Share
AS 21- Consolidated Financial Statements
AS 22- Accounting for Taxes on Income
AS 23- Accounting for Investments in Associates in Consolidated Financial Statements
AS 24- Discounting Operations
AS 25- Interim Financial Reporting
AS 26- Intangible Assets
AS 27- Financial Reporting of Interests in Joint Ventures
AS 28- Impairment of Assets
AS 29- Provisions, Contingent Liabilities and Contingent Assets
AS 30- Financial Instruments Recognition and Measurements
AS 31- Financial Instruments

ACCOUNTING STANDARD 15:

AS 15- Employee Benefits (revised 2005):
Objective:
The objective of this Standard is to prescribe the accounting and disclosure for employee benefits.
The Standard requires an enterprise to recognise:
A liability when an employee has provided service in exchange for employee benefits to be paid
in the future;
An expense when the enterprise consumes the economic benefit arising from service provided by
an employee in exchange for employee benefits.
Overview:
It was originally issued in the year 1995, lastly revised in 2005
It was made initially applicable from 3rd Feb 2007 and then deferred to 1st April 2008
Applicable to all Entities having more than 50 Employees
Scope:
This Standard should be applied by an employer in accounting for all employee benefits, except
employee share-based payments
Employee benefits include:
Short Term Employee benefits (STEB): Employee benefits which are expected to be paid or transferred
To employee within 12 months.
Examples:
Wages, salaries and social security contributions like (contribution to an insurance
company by an employer to pay for medical care of its employees)
Paid annual leave, profit-sharing and bonuses (if payable within twelve months of the end
of the period) and nonmonetary benefits (such as medical care, housing, cars and free or
subsidised goods or services) for current employees.

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 Post-employment Employee Benefits (PEEB): It comes into action only after the completion of
Employment period.
Examples:
Gratuity, pension, other retirement benefits
Post-employment life insurance and post-employment medical care

Long term Employee Benefits (LTEB): All Employee benefits other than PEEB and
Termination Benefits which do not fall wholly within 12 months.
Examples:
Long-service leave, jubilee or other long-service benefits,
Long-term disability benefits
If they are not payable wholly within twelve months after the end of the period,
profit-sharing, bonuses and deferred compensation
Termination Benefits: It comes into due when Employee-employer relation ends, which means
before the normal retirement period.
Example: Voluntary contribution
Employee benefits include benefits provided to either employees or their spouses, children or other
dependents and may be settled by payments (or provision of goods or services).

NOTE

AN EMPLOEE MAY PROVIDE SERVICES TO AN

ENTERPRISE ON A FULL-TIME, PART-TIME,
PERMANENT, CASUAL OR TEMPORARY BASIS
Companies that fall under AS 15:
Listed companies on any stock exchange in India
Banks/FIs/Insurance companies
Companies having turnover of more than 50 Crore
Companies having borrowings or deposits of more than 10 Crore
Companies employing more than 50 employees
Holding or subsidiary company of any of the above
GLOBAL RISK CONSULTING (GRC):
Global Risk Consulting (GRC) specialises in providing advisory services in the areas of Risk Management,
Quantification and Management of liabilities. Our expertise spans in the areas of Life Insurance, General
Insurance, Health Insurance, Pensions, Social Security, Employee Benefits and Asset Management, in relation to
the Liabilities including all types of Actuarial Projections. The firm uses financial and business modelling skills to
assist clients in business management both at strategic and operational level.

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RELEVANCE OF ACCOUNTING STANDARD 15 TO GRC:

GRC offers services on a variety of strategic issues related to Employee Benefit, Long term incentives to meet
the business requirements. Its Actuarial Valuation services help to accurately estimate liabilities under
defined benefit schemes.
If your company meets any one of the above then you need long term employee benefit valued by
Qualified actuary for correct reporting in financial statements. The team of GRC long experience in this field
and constantly evolve themselves with the changing times, understanding the importance of fast turnaround
time, especially in the times of pressure and thus ensure fast and efficient service with active support.
GRC can offer AS 15 relevant services like:
Actuarial valuation of Pension benefits, Long-term care, Leave encashment liabilities, earned leave/leave
benefits, Sick leave benefits, Gratuity Liabilities etc.
To go deep as per AS 15 applicability GRC provides the following functions:
Design and Review of Employee Benefit Schemes:

Market benchmarking of Benefit Schemes

Cost estimation for alternative defined benefit scheme designs
Assessment of funds
Setting terms for early/late retirements

Asset Liability Management (ALM): Detailed forecast on companys Gratuity, PF, Pension Fund etc.
highlighting the asset liability risks that need to be considered
Funding/Selection of Fund Manager: (Relevant to PEEB of AS 15)
Actuarial Valuation for Funding of Pension Funds, establishing new pension fund
Assessment of impact of changes in pension funds regulation
Pension funds liquidation
Fund Manager Selection

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GRC can use the Segmentation, Targeting and Positioning (STP) concept to target the companies
following the Accounting Standard 15 as GRC by experience in the field of Employee Benefits Advisory Services
using its expertise in Asset Liability Management and Risk Management techniques.

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