Understanding Long Service Leave Calculations in Accounting

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the accounting issues you highlighted and offered the following advice. Issue 1: Calculation of long service leave According to IAS 19 employee Benefits (amended 2011), it outlines the accounting requirement for employee benefits fits and long term benefits such as service leave. The standard establishes the principle that the cost of providing employee benefits should be recognized in the period in which the benefit is earned by the employee rather than when it is paid or payable. The Australian accounting standard AASB 119 sets out long service leave entitlements should be recognized and measured in employee’s financial statements. AASB 119 requires the identification of these items in the financial statements: • Current and non-current liability • Service cost • Interest cost • Re-measurement/ actuarial gains and losses Current and non-current liability …show more content…

• Employee turnover • Discount rate • Salary increase and how and when leave is actually taken (leave taking pattern) Service cost – It is the value of the long service entitlements, accursed during a financial year is identified in the income statement for the financial year. The service cost is calculated by determining the present value of new accruals. Net interest on the liability The interest cost is the interest accrued on the long service leave liability over the financial year. The interest cost calculation identification of long service leave liability at the start of the financial year, the benefits paid during the financial year and the service cost it’s recognized in the income statement. Re-measurement of the liability These arise due to changes in actuarial assumptions or due to experience during the by the employee rather than when it is paid. It should be identified in the financial statements whether a current and non-current liability or interest or service cost in the income

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