This free, guided checker walks your finance team through the key decision points for IAS 19 Defined Contribution Employee Benefits. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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IAS 19 applies to all employee benefits other than share-based payments within IFRS 2 scope, grouped by IAS 19.5 into short-term, post-employment, other long-term, and termination benefits. This wizard covers the contribution-based model for post-employment and similar plans. Inventory every arrangement - including informal or jurisdiction-mandated schemes such as severance indemnities - before concluding on scope, since unwritten practices can create obligations.
The defined contribution framework does not apply; any short-term benefits are accrued as the related service is rendered under IAS 19.11.
Official guidance: IFRS issued standards
Under IAS 19.28 a defined contribution plan limits the entity's legal or constructive obligation to the agreed contributions, so actuarial and investment risk fall on the employee. Read the plan terms for benefit formulas not linked solely to contributions, guaranteed returns, or informal practices - each shifts risk back to the entity and forces defined benefit classification under IAS 19.29. The common trap is a legally defined contribution vehicle carrying an employer-guaranteed minimum return.
Classify the plan as defined benefit under IAS 19.29 and measure the obligation with the projected unit credit method under IAS 19.57 and IAS 19.67, not the contribution model.
Official guidance: IFRS issued standards
IAS 19.51(b) recognizes the contribution as an expense in the period the employee renders the related service, unless another standard permits capitalization into the cost of an asset such as inventory (IAS 2) or property, plant and equipment (IAS 16). Trace the accrual to payroll periods rather than funding dates. Recording the expense only when cash is remitted to the plan understates liabilities whenever payment lags service.
Rebuild contribution expense on employee service periods as required by IAS 19.51(b), rather than on funding or invoice dates.
Official guidance: IFRS issued standards
IAS 19.51(a) requires a liability for contributions due for service already rendered, after deducting amounts paid. Where contributions are not expected to be settled wholly within twelve months of the end of the annual period, IAS 19.52 requires discounting at the IAS 19.83 rate. Reconcile the accrual to the plan administrator's contribution invoice and the payroll cutoff to catch the year-end stub period.
Accrue the contribution liability when the employee service is received per IAS 19.51(a), discounting amounts settled wholly beyond twelve months under IAS 19.52.
Official guidance: IFRS issued standards
IAS 19.32 classifies a multi-employer plan as defined contribution or defined benefit under the terms of the plan, including any constructive obligation beyond the formal terms. Industry-wide union plans commonly pool risks so that participating employers effectively underwrite each other's employees, which points to defined benefit. Read the participation agreement and the plan's funding rules rather than relying on how the plan describes itself.
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Official guidance: IFRS issued standards
If the multi-employer plan is defined benefit, IAS 19.33 requires the entity's proportionate share of the obligation, assets, and cost; only when sufficient information is not available does IAS 19.34 allow defined contribution treatment with the IAS 19.148 disclosures. Request the plan actuary's allocation data before concluding it is unavailable. A contractual deficit funding schedule creates a recognizable liability under IAS 19.37 even under as-if-defined-contribution treatment.
Account for the entity's proportionate share of the multi-employer defined benefit plan under IAS 19.33, and recognize any liability from a contractual deficit funding agreement under IAS 19.37.
Official guidance: IFRS issued standards
IAS 19.43 accounts for state plans in the same way as multi-employer plans, and most are defined contribution because the entity's obligation is limited to the levies due. IAS 19.46 treats insured premiums as defined contribution unless the entity retains a legal or constructive obligation to pay the benefits directly or to fund a shortfall. Read the insurance contract for profit-sharing, surrender, or top-up clauses that keep risk with the employer.
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Official guidance: IFRS issued standards
IAS 19.51(a) recognizes contributions paid in excess of the amount due for service before the reporting date as a prepaid asset, but only to the extent the prepayment leads to a reduction in future payments or a cash refund. Verify recoverability against the plan rules or the administrator's confirmation. Advance funding of January contributions in December is the typical source of this asset at year end.
Recognize a prepaid contribution asset for the excess of payments over contributions due, to the extent of future payment reductions or refunds, per IAS 19.51(a).
Official guidance: IFRS issued standards
Termination benefits arise from the termination of employment rather than from service, so IAS 19.165 recognizes them at the earlier of the date the entity can no longer withdraw the offer and the date it recognizes related IAS 37 restructuring costs. Enhanced employer contributions offered as part of a severance package follow the termination model, not the contribution model. Screen restructuring programs for benefits mislabeled as ordinary plan funding.
Recognize termination benefits under the IAS 19.165 timing test and measure them under IAS 19.169, outside the defined contribution charge.
Official guidance: IFRS issued standards
The period charge should equal contributions due for the service rendered, after deducting amounts already paid and net of refunds or contribution reductions the entity is entitled to, per IAS 19.51(a). Discount contributions not expected to be settled wholly within twelve months at the IAS 19.83 rate per IAS 19.52. Contribution holidays granted by the plan reduce expense in the period they apply to, not when they are negotiated.
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Official guidance: IFRS issued standards
IAS 19.53 requires disclosure of the amount recognized as an expense for defined contribution plans, and IAS 19.148 adds plan-level disclosures for multi-employer defined benefit plans accounted for as defined contribution, including the funding arrangement, any deficit or surplus, and the entity's level of participation. Related party requirements also capture contributions for key management personnel (IAS 24.17(b)). Tie the disclosed expense to the payroll and contribution reconciliation.
Complete the defined contribution note: the expense recognized per IAS 19.53 and, for multi-employer defined benefit plans accounted for as defined contribution, the IAS 19.148 disclosures.
Official guidance: IFRS issued standards
IAS 1.117 requires disclosure of material accounting policy information, and the employee benefits policy should state that defined contribution costs are expensed as the related service is rendered under IAS 19.51. Confirm the note describes the actual mechanics - including multi-employer, state, and insured plan treatment - rather than boilerplate. A policy note that covers only defined benefit plans while the entity operates contribution plans is a common gap.
Defined contribution recognition and measurement under IAS 19.51-52 and the IAS 19.53 and IAS 1.117 disclosures appear complete. Finalize the employee benefits accounting policy note required by IAS 1.117 before financial statement authorization.
Official guidance: IFRS issued standards
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