Overview: What is AS 15?
AS 15 (Employee Benefits) is the Indian accounting standard that explains how companies should account for employee benefits such as gratuity, leave encashment, pension and other long-term employee benefits. In simple terms, AS 15 ensures that a company's financial statements reflect not only the benefits it has already paid to employees, but also the obligations that are building up over time. This gives management, auditors and investors a more accurate picture of the company's financial position.
AS 15 was issued by the Institute of Chartered Accountants of India (ICAI) and is notified under the Companies (Accounting Standards) Rules, 2021.
Why was AS 15 introduced?
Before standards like AS 15, companies had considerable freedom in how, or whether, they accounted for long-term employee obligations. A company could treat gratuity as a cash expense recognised only when an employee actually left, with nothing on the balance sheet reflecting the obligation accumulating in the meantime. AS 15 closes that gap. It requires companies to recognise the obligation as employees earn it, year on year, so the balance sheet reflects a more honest picture of what the company genuinely owes, rather than only what it happens to have paid so far.
Which employee benefits are covered under AS 15?
AS 15 divides employee benefits into four broad categories:
| Category | Description | Common Examples |
|---|---|---|
| Short-term employee benefits | Benefits expected to be settled within 12 months of the reporting date. | Salary, bonus, paid leave |
| Post-employment benefits | Benefits provided after an employee leaves the organisation. | Gratuity, pension |
| Other long-term employee benefits | Benefits earned over several years and settled after 12 months. | Long-term leave encashment |
| Termination benefits | Benefits payable when employment ends before the normal retirement date. | Voluntary retirement schemes (VRS), restructuring compensation |
Which companies generally apply AS 15?
AS 15 applies to companies that are not required to follow Ind AS. In broad terms, that generally means unlisted companies below the net worth thresholds that trigger mandatory Ind AS adoption, and companies that are not part of a group headed by an Ind AS company. Listed companies, and larger unlisted companies above the prescribed thresholds, instead follow Ind AS 19, a related but distinct standard we explain in AS 15 vs Ind AS 19. Applicability can shift as a company grows, is acquired, or becomes part of a larger group, so it is worth revisiting periodically rather than assuming last year's position still holds.
Frequently Asked Questions
“We only need an actuarial valuation if our accounts are audited.”
Not necessarily. The need for an actuarial valuation depends on the requirements of the applicable accounting standard, not simply on whether the financial statements are audited. If AS 15 requires actuarial measurement for your employee benefit obligations, the valuation supports proper financial reporting.
“Our finance team can calculate gratuity without an actuary.”
Finance teams play an important role in providing employee data, but estimating long-term employee benefit obligations often involves actuarial assumptions such as future salary increases, employee turnover and life expectancy. Where AS 15 requires actuarial measurement, companies generally engage a qualified actuary to perform the valuation.
“Small companies don't need to worry about AS 15.”
Not always. While certain reliefs may be available for eligible entities under the standard, there is no blanket exemption simply because a company is small. The applicable requirements depend on the company's reporting framework and circumstances.
“AS 15 and Ind AS 19 produce completely different results.”
In many cases, both standards measure the same underlying employee benefit obligation using similar actuarial principles. The differences are often more noticeable in areas such as recognition, presentation and disclosure rather than in the underlying liability itself.
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