ACCA Financial Reporting (F7) Practice Exam

Short-term employee benefits encompass all forms of benefits that are expected to be settled within twelve months after the end of the reporting period. These include wages, salaries, and social security contributions, which are compensation provided to employees for their services within that short timeframe. Additionally, short-term compensated absences, such as paid sick leave and vacation days, also fall under this category because they represent a pay obligation that must be settled within the upcoming year.

The inclusion of wages, salaries, social security contributions, and short-term compensated absences in short-term employee benefits aligns with the definitions outlined in financial reporting standards, which specify that any benefit that can be anticipated to be paid in the near term is categorized as a short-term obligation.

In contrast, other choices include elements that either do not align with the definition of short-term employee benefits, such as retirement contributions, which relate to long-term benefits, or investment income and stock options, which are not immediate cash outflows but rather financial instruments that may benefit employees over a longer period. Lastly, while direct cash payments are a component of employee benefits, solely recognizing them excludes other forms of compensation that also represent short-term obligations. Hence, option B is the most comprehensive and accurate reflection of what constitutes short-term employee benefits