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PSAK 24 Implementation Guide

Employee Benefits Accounting & Pension Valuation (Equivalent to IAS 19)

The accounting for employee benefits, for pensions in particular, is complex. The liabilities in defined benefit pension plans are frequently material. They are long-term and difficult to measure, and this gives rise to difficulty in measuring the cost attributable to each year.

Employee benefits are all forms of consideration given or promised by an entity in exchange for services rendered by its employees. These benefits include salary-related benefits (such as wages, profit-sharing, bonuses and compensated absences, such as paid holiday and long-service leave), termination benefits (such as severance and redundancy pay) and post-employment benefits (such as retirement benefit plans). PSAK 24 (equivalent to IAS 19) is relevant for all employee benefits except for those to which PSAK 53.

Post-employment benefits include pensions, post-employment life insurance and medical care. Pensions are Provided to employees either through defined contribution plans or defined benefit plans.

Recognition and measurement for short-term benefits is relatively straight-forward, because actuarial assumptions are not required and the obligations are not discounted. However, long-term benefits, particularly post-employment benefits, give rise to more complicated measurement issues.

In response to that, we publish this basic application guidance and intermediate explanation to these accounting issues, the materials can be downloaded on the link/materials below: