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ICAI Issues Guidance on Accounting of Enhanced Gratuity Liability
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Owing to changes introduced under the new labour codes, gratuity costs are set to rise following the redefinition of wages and broader eligibility covering fixed-term and contractual employees. ICAI has advised that such liabilities be recognised in interim financial statements for the December quarter, in compliance with relevant accounting standards.
NEW DELHI: The Institute of Chartered Accountants of India (ICAI) has stated that any rise in gratuity liability arising from the implementation of new labour codes should be classified as a past service cost and expensed immediately through the profit and loss account. This accounting treatment may have an adverse impact on companies’ short-term profitability.
NEW DELHI: The Institute of Chartered Accountants of India (ICAI) has stated that any rise in gratuity liability arising from the implementation of new labour codes should be classified as a past service cost and expensed immediately through the profit and loss account. This accounting treatment may have an adverse impact on companies’ short-term profitability.
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