voluntary retirement scheme

This query is : Resolved

R.K.AGARWAL

R.K.AGARWAL (Querist)
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09 December 2009 We are offering VRS to contractor workers.
Payments will be made by contractors upon
resignation by the workers.
We will reimburse the amount to the contractors.
What will be the accounting treatment and
can this amount be ammortised in five years.
kindly advise
thanks

Kishanlal Paliwal

Kishanlal Paliwal (Expert)
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09 December 2009 Yes, we may amortise the compensation package offered to Contractor's worker. The entries schema may be disined as follows;

1. On settelement of VRS amount payable.

VRS benefit expenses deferred A/c Dr.
To, Contractor's A/c
(The VRS amount setteled with regard to contractor's workers as per details enclosed)

2. On payment od amount.

Contracor's A/c Dr.
To, Bank A/c
(VRS amount paid to Contractor's workers as per enclosures)

3. On Deferement of VRS amount paid.

VRS benefit expenses A/c Dr.
To VRS benefit expenses deferred A/c Dr.
(VRS amount transfered to P&L A/c)

Note: It is advisable to take an undertaking from Contractor's worker that they have opted to take VRS on their own will and not under any direct/indirect pressure or misrepresentation from Contractor or Principal employer or their authorised representative or agent. And that this undertaking shall free principal employer from any kind of legal or personal libilities on account of workmens compensation.

Regards