Conduit Corporation has 45 current employees: 5 managers and 40 non-managers. The average wage paid is $250 per day for non-managers. The company has just finished negotiating a new employee contract with the non-managers that would see this increase by 3% effective January 1, 2015. The company's fiscal year end is December 31, 2014. You are the controller for Conduit and are completing the year-end adjusting journal entries. The company has the following employee benefit plans.
1. Non-manager employees are entitled to two sick leave days per month. If any days are not taken, they may accumulate and be taken as vacation or paid in cash. The sick days may be carried forward to the end of the next year.
At the end of the year, there were 60 accumulated sick leave days that had not yet been taken.
2. Parental leave: Any employee is entitled to one year's parental leave. The company will pay the amount to top up the unemployment benefits received to make up the employee's annual salary at the time the leave is taken. Currently, there is one employee on parental leave, who started her maternity leave on December 15, 2014. It is expected that the top-up required will be $1,000 per month for 12 months and the employee was paid $500 on December 31, 2014. There is another employee who is trying to adopt a child and has also said that he will want paternity leave at the time the adoption occurs. The top-up is also estimated to be $1,000 per month for this employee.
3. A profit-sharing plan provides for employees to receive a bonus of 3% of net profit before taxes for all employees who worked for the company during the year. The net profit before taxes is estimated to be $2 million. The bonus is allocated 30% to the five managers and 70% to the remaining employees. However, the bonus is not paid until October 31 of the following year, and only to employees who remain with the company. The company expects a 5% turnover by October 31, 2015, for the non manager group.
4. The company pays on average three weeks' vacation pay, even though Conduit's legal obligation is only for two weeks. This vacation pay accumulates and can be carried over for up to one year. However, if the employee leaves before the vacation is taken, then they are only legally entitled to the two-week rate. At the end of the year, there were 10 non-manager employees who had only taken one week of their annual entitlement during 2014. There is a probability of 15% that one of these employees will leave before the full vacation accrual is taken.
5. The company is being sued by a former employee. The non-manager employee contends that not enough severance was paid when he was let go in June 2014. The ex-employee's lawyers are asking for a severance payment of two weeks' pay for each year worked, which in this case was 25 years. The company agreed to pay the employee severance of $30,000 when he was asked to leave the company. This $30,000 has already been accrued in the accounting records. The case is still being disputed and will go to arbitration early in March 2015. Conduit's lawyers believe that the probabilities of settlements for additional amounts (over and above the $30,000) are as follows: 25% probability of settling at $20,000, 60% probability of settling at $28,000, and 15% probability of settling at $30,000.
Instructions
You are the controller for Conduit and are completing the year-end adjusting journal entries. Discuss each of the above issues and determine the journal entries that would be required under IFRS and ASPE. Also determine whether the benefits are accumulating or non-accumulating and vesting or not vesting.