(Based on Illustrative example, AASB 119, paras 159–170.) Meadow Ltd plans to close
a factory in 10 months’ time, when it will terminate the employment of all employees
who remain at the factory. Meadow Ltd requires the services of the employees at the
factory to fulfil its contractual obligations and so the terms of the plan of termination
are as follows: Each employee who continues to provide services until the factory closure will receive a cash payment of $40 000 on the termination date.
• Each employee who leaves before the closure of the factory will receive a cash
payment of $15 000.
At the date the termination plan is announced, there are 120 employees at the factory
and only 20 employees are expected to leave before the factory’s closure.
Explain how the benefits from the plan of termination would be accounted for by Meadow
Ltd in accordance with the requirements of AASB 119. (LO2, LO8)