New accounting norms for retirement benefits - The Economic Times

NEW DELHI: The country’s apex body on accounting standard has okayed a change in the way Indian companies account for their employee’s post retirement benefits like gratuity. Instead of providing for these in profit and loss account, companies can create a separate reserve.

As against the proposed norm in India under the international financial reporting standards (IFRS) requiring companies to show the financial effect of employee benefit schemes in a company’s profit and loss account, the government will now allow firms not to show the effect directly in their books of accounts but reflect them separately in a reserve account, said an official in the government, requesting anonymity.

The change follows demands from the industry which said that taking the burden of actuarial valuations of longterm employee benefit schemes could take a toll on their bottom line.

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New accounting norms for retirement benefits - The Economic Times