Are you aware of the changes to GRAP 25 on Employee Benefits?

  • September 12, 2022
  • Posted by: Julianne Vissie
  • Category: Blog
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The Standard of GRAP on Employee Benefits (GRAP 25) was revised by the Accounting Standards Board in 2021. The revised Standard becomes effective 1 April 2023. Related amendments were made to IGRAP 7 on The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction and become effective on the same date.

What changes were made to GRAP 25?

The changes per type of employee benefit are summarised in the table below. The changes mostly affect the measurement, presentation and disclosure of post-employment defined benefit plans.

Type of employee benefit Description Proposed changes to the principles
Short-term employee benefits Benefits due wholly before twelve months after the end of the reporting period in which service was rendered. No changes; guidance on distinguishing short and long-term benefits was added.
Post-employment benefits: Defined contribution plans Employer pays fixed contributions into separate fund and has no further obligations to pay contributions. No changes; on distinguishing defined contribution plans from defined benefit plans was added.
Post-employment benefits: Defined benefit plans Plans other than defined contribution plans. The obligation and related plan assets (if any) are combined in a new component, the “net defined benefit asset/liability”.
Three components are introduced:

•       Current service cost, past service cost (including curtailments), and settlement cost are combined and called “service cost”.

•       Interest cost and expected return on plan assets are presented on a net basis as “net interest expense/revenue”.

•       Actuarial gains and losses, return on plan assets and changes in the effect of the asset ceiling are grouped and called “remeasurements”.
Guidance is provided on:

•       Actuarial assumptions, including the effect of employee and third-party contributions on service cost and remeasurements.

•       Plan amendments, curtailments and settlements, clarifying when the effect of the asset ceiling is considered and the information to be used in determining current service cost and net interest.
A disclosure objective and guidance on how to meet  the objective are included.
Other long-term employee benefits All employee benefits other than short-term, post-employment and termination benefits. A disclosure objective and guidance on how to meet the objective are included.
Termination benefits Provided in exchange for termination of employment. Guidance is provided on:

•       distinguishing termination benefits from other employee benefits;

•       when termination benefits should be recognised; and

•       the measurement of termination benefits.

A disclosure objective and guidance on achieving the objective are included.

What are the potential implications of the changes?

As noted, the changes mostly affect defined benefit plans. Although defined benefit plans may be phased out by some entities, there are still many entities that have material defined benefit plans. The changes would require entities to identify, classify and present the information on defined benefit plans differently in future.

Entities that provide other long-term employee benefits and termination benefits may currently disclose limited information about these benefits as no specific disclosure requirements are included in GRAP 25. Although the revisions still do not require specific information to be disclosed about these benefits, disclosure objectives have been added. Entities would need to consider whether the disclosure requirements in other Standards of GRAP meet the objectives, for example GRAP 20 on Related Party Disclosure, GRAP 1 on Presentation of Financial Statements and GRAP 19 on Provisions, Contingent Assets and Contingent Liabilities and consider providing additional information if necessary to meet the objectives. 

How will the changes be implemented?

The transitional provisions require entities to apply the changes retrospectively, with some exceptions. This means that entities would be required to apply the new requirements for the first time in their 2023/24 financial statements, for both the 2023/24 and 2022/23 (comparative) information.

Where can the final documents be accessed?

The key changes per type of employee benefit are published on the ASB website and can be accessed here. Other resources available using this link include a feedback statement on the Exposure Draft, a presentation on the changes, and the final pronouncements.



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