ACCA SBR ^UK Syllabus C. Reporting The Financial Performance Of A Range Of Entities - Employee benefits - Notes ^{14 / 24}

Examinable differences between Section 28 of FRS 102 and IAS 19 relate to short-term benefits and termination benefits.

Termination benefits

An entity may be committed, by legislation, other agreement, or a constructive obligation to make payments (or provide other benefits) to employees when it terminates their employment. Such payments are termination benefits.  

These do not provide an entity with future economic benefits because termination benefits do not provide an entity with future economic benefits, and are recognised as an expense in profit or loss immediately. 

Under FRS 102, if a termination is linked to restructuring, an entity must be demonstrably committed to a termination, which is only the case when the entity has a detailed formal plan for the termination and is without realistic possibility of withdrawal from the plan.

IAS 19 has similar rules regarding terminations linked to restructuring

but gives more detailed guidance on the criteria which demonstrate that the entity is committed to the plan:

• Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made.

• The plan identifies the number of employees whose employment is to be terminated, their job classifications or functions and their locations (but the plan need not identify each individual employee) and the expected completion date.

• The plan establishes the termination benefits that employees will receive in sufficient detail that employees  can  determine  the  type  and  amount  of  benefits  they  will  receive  when  their employment is terminated.