ACCA Strategic Business Reporting (SBR) Practice Exam

What should an entity disclose regarding key personnel compensation?

1. Only short-term benefits

2. Only post-employment benefits

3. Both short-term and long-term employee benefits, post-employment benefits, termination benefits, and share-based payments

4. Just the total compensation amount

The correct answer is: Both short-term and long-term employee benefits, post-employment benefits, termination benefits, and share-based payments

An entity is required to disclose a comprehensive view of key personnel compensation to provide stakeholders with a clear understanding of the costs associated with key management personnel. This comprehensive disclosure includes short-term employee benefits, which typically encompass salaries and bonuses, as well as long-term employee benefits, such as deferred compensation arrangements. In addition, the disclosure must cover post-employment benefits, which include pensions or retirement benefits, termination benefits for those who leave the company, and share-based payments, which refer to equity compensation plans. By presenting all these components together, the financial statements offer transparency about how compensation is structured and the total expenditure incurred by the entity related to key personnel. This level of detail ensures that stakeholders can assess the appropriateness and fairness of remuneration practices within the organization, promoting accountability and informed decision-making. Furthermore, such disclosures align with the requirements set by accounting standards regarding the reporting of employee benefits, providing a fuller picture of the company's liabilities and expenses in this area.