HI6025 - Accounting for Employee Benefits: A Comparative Analysis

This report provides a comprehensive analysis of two journal articles concerning the accounting treatment of employee benefits. The report begins with an overview of the topic and introduces the selected articles, focusing on their reasons for selection, research questions, and purposes. The analysis includes a comparative study of the articles' findings, highlighting similarities and differences, particularly regarding the application of IFRS and IAS 19. The implications of each study are explored, specifically for Australian accountants, accounting regulators, and investors, considering the impact on financial reporting. The articles analyze the accounting reporting of employee benefits between IFRS and other accounting standards and discretionary accounting choices in IAS 19 pension accounting. The report concludes with a summary of the key findings and their significance in the context of employee benefits accounting and financial reporting standards.

RUNNING HEAD: ACCOUNTING
Accounting for Employee Benefits

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Executive summary
The report summarizes the overall analysis of the two journal articles based on the topic
accounting for employee benefits. The report started with the brief overview of the topic along
with the introduction of journal articles selected. The second part reflects three reasons for
selecting each article followed by the purpose and research question of each one of them. In the
later part similarities and differences in the findings of both the journals have been explained by
analyzing the facts stated in them. The report also provide insights about the implication of each
study on the Australian accountants, accounting regulators and investors who are an external user
of financial reports, followed by the conclusion in the end.

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Introduction
The report contains an overall study of the two journal articles selected on the topic accounting
for Employee Benefits. International Accounting Standard Board has formulated a standard IAS
19 Employee Benefits which lay down some provisions requirements to be followed while
accounting for all type of employee benefits. The benefits include all type of services that are
provided to the employee in exchange of its services or at time of termination of employment.
There are different types of benefits such as short term and long term benefits, termination
benefits, post employment benefits. As per the standard, the company is require to recognize the
cost of providing employee benefits in the year in which the benefit is earned by the employee1.
The report studies the two journal article based on this topic named as:
 A comparative analysis for the accounting reporting of ‘employee benefits’ between
IFRS and other accounting standards: a case study for the biggest listed entities in
Greece2.
 Discretionary accounting choices: the case of IAS 19 pension accounting3.
Both of the articles are taken from American Journal of Economics and Business Administration
and Accounting and Business Research respectively. The reasons for choosing them, their
purpose and research question, similarities and differences in the finding and their implications
1 IAS, (2018). “IAS 19 – Employee Benefits” [Online]. Available: https://www.iasplus.com/en/standards/ias/ias19
2 K. Liapis and El Thalassinos, “A Comparative Analysis for the Accounting Reporting of “Employee Benefits”
between IFRS and other Accounting Standards: A Case Study for the Biggest Listed Entities in Greece” International
Journal of Economics and Business Administration, Vol. 1, No. 1 (2013), 91-116.
3 M. Glaum, Tobias Keller and Donna L. Street, “Discretionary accounting choices: the case of IAS 19 pension
accounting” Accounting and Business Research, Vol. 48, No. 2 (2017), 139-170.

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all are discussed in the report. In the last, a conclusion is given which summarizes all the
findings of the report.
Part A
Article 1: Reasons for selecting
 The main reason for selecting the article is that it provides insights about the accounting
treatment done in context of Employee Benefits. It focuses on making a comparison
between the accounting made as per International Financial Reporting Standards and
other standards. The study takes into account the comparison between IFRS and Greek
Generally Accepted Accounting Principles (GGAAP) along with IAS 19 and US
Financial Accounting Standards (USFAS) 87.
 The outcomes of the article mainly focused on figuring out the right accounting for the
Employee Benefits that has to be followed by the entities operating in Greece and in
other parts of the world. It find put the appropriate adjustments that has to be made at
time of presenting and making accounting treatment of the benefits provided to the
employees in the financial statements4.
 The third reason for choosing this article is that it explains in detail about the different
types of benefit plans an employee can avail in accordance with IFRS and international
practices. In addition, it completely addresses questions like to what extent a company
should present employee benefits in its final accounts. On a whole, it focuses on the
similarities and differences between the various accounting standards5.
4 K. Liapis and El Thalassinos, “A Comparative Analysis for the Accounting Reporting of “Employee Benefits”
between IFRS and other Accounting Standards: A Case Study for the Biggest Listed Entities in Greece” International
Journal of Economics and Business Administration, Vol. 1, No. 1 (2013), 91-116.
5 ibid

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Article 2: Reasons for selecting
 One of the reasons for selecting this article is that it solely focuses on treatment of
defined benefit pension plan which is one of the categories in the benefits available to the
employee. It figures out the different methods used by the companies to account for the
pension benefit plan.
 The article focuses on the discretionary choices selected by the stock listed companies
operating in UK, France and Germany for the purpose of accounting for defined benefit
pension plans in accordance with the provisions of IAS 196.
 The research conducted in context of Pension accounting provide insights about the early
adoption of equity method by the companies and the choice of the companies for
presenting interest cost and expected return in their operating and financial income7.
Part B
Purpose and research question of both the articles are as follows:
Article 1
The main purpose of the study is to illustrate a comparative analysis between IFRS and other
accounting standards in context of accounting treatment for Employee Benefits. The aim is to
conduct an empirical analysis of 20 biggest listed companies in the Athens Stock Exchange
(FTSE 20 index of the ASE). The objective of the study is to provide insights about the
presentation of various employee benefits in the financial statements of the entities after the
adoption of IFRS and specifically after the introduction of IAS 19.
6 M. Glaum, Tobias Keller and Donna L. Street, “Discretionary accounting choices: the case of IAS 19 pension
accounting” Accounting and Business Research, Vol. 48, No. 2 (2017), 139-170.
7 ibid

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The research question carried out by the article is in three phases which is as follows:
 The first phase analyzes the different benefits and benefit plans available to the
employees. It sets out the question that to what extend employee benefits are presented in
companies’ final accounts and how they cover and demonstrate the same for the people
working in the organization8.
 The second phase figures out the similarities and differences between different
accounting standards used for the treatment of employee benefits. The research question
is to compare the two main standards that are IAS and IFRS with the US GAAP.
 Third phase provides the outcome of applying IFRS in Greece and identifies the issues
arising from the implementation of IAS 19 on the 20 selected companies9.
Article 2
The goal of conducting this research is to known about the manner in which listed companies in
UK, France and Germany uses the two discretionary choices in context of accounting for defined
benefit pension plans under IAS 1910.
The research question set out by the article is to analyze the decision of voluntarily adopting the
equity method early for accounting the actuarial gains/losses. Another question addressed was to
evaluate the choice of companies to reflect net pension interest cost in operating and financial
income11.
8 K. Liapis and El Thalassinos, “A Comparative Analysis for the Accounting Reporting of “Employee Benefits”
between IFRS and other Accounting Standards: A Case Study for the Biggest Listed Entities in Greece” International
Journal of Economics and Business Administration, Vol. 1, No. 1 (2013), 91-116.
9 ibid
10 M. Glaum, Tobias Keller and Donna L. Street, “Discretionary accounting choices: the case of IAS 19 pension
accounting” Accounting and Business Research, Vol. 48, No. 2 (2017), 139-170.
11 ibid

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Part C
Similarities in the findings
The main factor which contributed to the similarity in finding of both the articles is that they
include the analysis of the listed companies from different countries. The findings of both the
articles suggested that companies should properly follow the IAS requirements and adopt IFRS
for accounting of employee benefits. It is stated that whether they adopt equity method for
pension accounting or present interest cost in income statement, the firms has to follow the
proper procedure and work in the legal framework of IFRS12. It has been suggested that IFRS
brings more transparency and shows greater prudence and has been adopted by many entities.
Difference in the findings
The findings of article one were based on the comparison done for IFRS and other standards
while on the other side article two’s findings were only focused on the pension accounting and
benefit plans. Moreover, the sample size and methodology adopted of both the studies was also
different which bring a major change in their findings. Overall, findings of article one covers the
whole requirements of Employee Benefits whereas article two was only focused on two options
selected by the companies of limited countries for accounting the defined benefit pension plans13.
Part D
Implications of Article 1
Accountants in Australian companies
12 ibid
13 K. Liapis and El Thalassinos, “A Comparative Analysis for the Accounting Reporting of “Employee Benefits”
between IFRS and other Accounting Standards: A Case Study for the Biggest Listed Entities in Greece” International
Journal of Economics and Business Administration, Vol. 1, No. 1 (2013), 91-116.

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 The accountants will get aware about the fact that adoption of IFRS will be more suitable
for treating the employee benefits under IAS 19.
 It provide insights to the accountants about the fact that IFRS gives more transparency
and more prudence by not allowing the surpluses to be shown in financial statements and
quickly recognizing the actuarial losses.
Accounting regulators
 The article make them aware about the IFRS adjustments or amendments made in 2011
which forecasted the curtailment or element of employee benefits plans due to the
financial crisis happened at that time.
 Another implication on regulators is that they need to analyse the provision made by the
Greek companies for employee benefits.
Investors
 Being the external stakeholder, the article allows the investors to know about the
accounting treatment used by the listed companies for their employee benefits.
 Another implication will be the fact that in what manner the IFRS adjustments have
impacted the financial position of Greek companies.
Implications of Article 2
Accountants in Australian companies
 The accountants get to know about the fact that the adoption of equity method may allow
the companies to reduce their pension liabilities in balance sheet or pension cost in
income statement. It was also stated that many companies adopted this method.

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 It was found out that the companies operating in France, Germany and UK present both
the pension interest costs and expected return on plan assets as per the argument of IASB.
Accounting regulators
 The article provides insights to the regulators that both the discretionary choices adopted
by the entities for pension accounting are in the legal framework as stated by IASB and in
accordance with the provisions of IAS 19.
 Regulators came to know that as the equity method become mandatory in 2013 but many
of the motivated companies used it early in order to have significant advantages of the
method.
Investors
 Being an external stakeholder, the investors get aware about the methods used by the
entities working in France, UK and Germany for accounting pension benefit of their
employees.
 The article also make them aware about the fact that the entities do disclose the two
pension cost components which are declared financial in nature by IASB, thus providing
fair view of its statements.
Conclusion
The above report concludes that it is very important for the entities to follow a proper procedure
and requirements while accounting for employee benefits. The studies highlighted the fact that
adoption of IFRS is more suitable for conducting an accounting treatment of the benefits
available to the employees. Further, the choices adopted by the companies for pension

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accounting are also appropriate and as per the IASB guidelines. Overall, it can be concluded that
proper guideline of international reporting standards and IAS 19 should be followed while the
employee benefits are accounted.
Bibliography
Glaum, M., Tobias Keller and Donna L. Street, “Discretionary accounting choices: the case of
IAS 19 pension accounting”, Accounting and Business Research, Vol. 48, No. 2 (2017): 139-
170.
Liapis, K. and El Thalassinos, “A Comparative Analysis for the Accounting Reporting of
“Employee Benefits” between IFRS and other Accounting Standards: A Case Study for the
Biggest Listed Entities in Greece”, International Journal of Economics and Business
Administration, Vol. 1, No. 1 (2013): 91-116.
IAS (2018). “IAS 19 – Employee Benefits”, [Online].
https://www.iasplus.com/en/standards/ias/ias19