| Background: GRAP 25 became outdated |
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| Changes were made to the international private and public sector accounting standards on employee benefits since GRAP 25 on Employee Benefits was originally issued. Stakeholders agreed that the Board should update the Standard as it became outdated. The Board used the opportunity to consider areas where local practices indicate that further guidance is required. Another outcome of the project was to update IGRAP 7 on The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, which is based on IFRIC 14 on IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. |
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The key changes are summarised in the table below. More information on the changes is available on the ASB website here.
| Type of employee benefit | Description of benefit | Key changes to the principles | | Short-term employee benefits | Benefits due wholly before twelve months after the end of the reporting period in which service was rendered. | No changes; guidance added. | | Post-employment benefits: Defined contribution plans | Employer pays fixed contributions into separate fund and has no further obligations to pay contributions. | No changes; guidance added. | | Post-employment benefits: Defined benefit plans | Plans other than defined contribution plans. | The obligation and related plan assets (if any) are combined in a new component, the “net defined benefit asset/liability”. | | Three components for the statement of financial performance comprised as: Current service cost, past service cost (including curtailments), and settlement cost are combined and called “service cost”. Interest cost and expected return on plan assets are presented on a net basis as “net interest expense/revenue”. Actuarial gains and losses, return on plan assets and changes in the effect of the asset ceiling are grouped and called “remeasurements”. | | Guidance is provided on: Actuarial assumptions, including the effect of employee and third-party contributions on service cost and remeasurements. Plan amendments, curtailments and settlements, clarifying when the effect of the asset ceiling is considered and the information to be used in determining current service cost and net interest. | | A disclosure objective and guidance on achieving the objective are introduced. | | Other long-term employee benefits | All employee benefits other than short-term, post-employment and termination benefits. | A disclosure objective and guidance on achieving the objective are introduced. | | Termination benefits | Provided in exchange for termination of employment. | Guidance is provided on: distinguishing them from other employee benefits; when they should be recognised; and their measurement. A disclosure objective and guidance on achieving the objective are introduced. |
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| First time application of the changes |
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These changes were effective 1 April 2023. The transitional provisions require that the changes are applied retrospectively (with a few exceptions). This means entities should apply the changes as if they were always applied, and would impact the presentation of the 2023/24 and the comparative information in the financial statements.
Ideally entities should have considered the impact of these changes in the previous period already to ensure they accumulate the necessary information to apply the changes retrospectively. It is however not too late to prepare for implementing these changes. |
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