Revised schedule vi

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 April 2012 According to R S VI, all the assets and liabilities will be divided into current as well as non current portion.

I would like to know about the treatment for Leave Encashment provision and Gratuity provision and its bifurcation into Current and non current portion.

Kindly provide your answer with few examples

Experts advices are solicited.

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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07 April 2012 If the accumulated leave are expected to be utilised within 12 months from the end of the reporting period then it would be short term benefit for the employee and accordingly current liabilities.
If accumulated leaves are expected to be carried forward beyond 12 months will be long term benefits and accordingly classified as non current.

CA Kishore Tallam

CA Kishore Tallam (Expert)
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07 April 2012 Since the provision for leave encashment will be done on actuarial valuation basis and also it is a long term benefit to employee, it will be classified as a Long term provision.
Same will be applicable to provision for gratuity also.

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Querist : Anonymous

Querist : Anonymous (Querist)

07 April 2012 Dear Experts,

I dont agree with you.

How would you classify Gratuity and Leave encashment in Current and Non Current portion???

Now, I give you example, suppose in company there is rule that employee can accumulate 45 days of leave but he can use only 30 accumulated leave in a year and these 45 days leave will be elapsed after 3 years. He is entitled to accumulate 15 days leave per year.

How Gratuity will be classified into current and non current portion...I also faced this difficulties

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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07 April 2012 You mean to say company grants 45 leave in a year and out of that only 15 can be carried forward.
At the year end there will not be any provision for 30 leave, since these 30 leaves will have to calimed by the employee on or before the end of the F.Y.
For remaining 15 leave can not be utilised in the next year also, hence it would be long term liability and shall form part of non current liability.

Querist : Anonymous

Querist : Anonymous (Querist)

07 April 2012 Total leave per year eligibility - 15 days
Total utilisation of leave including accumulated - 30 days
Accumulation till 45 days and elapsed after 3 years

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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07 April 2012 Dear Author,
The liablity will be short term only in your case, since the employee has right to avail 30 leaves in a year, it means he can avail 2 years leave salary in a year.
If the empyee does not take any leave in the first year and second year also, he can utilised accumulated 30 leave in third year itself.
hence It will be short term only.
If the employee does not take any leave for 3 years then automatically at the end of 3 years it will lapse.
hence in any case, the liability towards such leave will be short term in nature.

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Querist : Anonymous

Querist : Anonymous (Querist)

07 April 2012 What about application of Gratuity?
How to treat it in Current and Non current portion?

Kindly support your answer with example.

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