T3 employee benefit - Review Q 13.1 13.5 13.6 13.10 13.18...

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Solutions Manual t/a Australian Financial Accounting 5/e by Craig Deegan 13–1 Review Q. 13.1; 13.5; 13.6; 13.10; 13.18 Chapter 13 Accounting for employee benefits 13.1 According to AASB 119 ‘Employee Benefits’, employee benefits means all forms of consideration given by an entity in exchange for services rendered by employees. Employee benefits would include, but would not be limited to, wages and salaries (including fringe benefits and non-monetary benefits), annual leave, sick leave, long service leave, superannuation and other post-employment benefits. 13.5 At issue here is whether we can really argue that they are present values if the discounting is done by applying a rate that relates to the bonds of other corporations, rather than the market-determined risk-adjusted rate for the specific entity. Conceptually, applying high quality corporate bond rates (or applying government bonds rates where no ‘deep market’ exists within a country for corporate bonds) does not provide present values. However, determining organisation-specific rates is a difficult task which involves a great deal of professional judgement. With this in mind, AASB 119 requires that present values be determined by applying high quality corporate bond rates (or government bond rates). This would be an easier (and less costly) approach to determining the value of the future cash flows and it would eliminate the need for a great deal of professional judgement (although,
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