ACCA Financial Reporting (F7) Practice Exam

What type of benefit might long-term employee benefits include?

1. Retirement benefits

2. Wages

3. Commissions

4. Bonuses

The correct answer is: Retirement benefits

Long-term employee benefits typically encompass benefits that an employer provides to employees beyond a one-year period. Retirement benefits fall into this category as they are designed to provide financial security to employees after they retire, often in the form of pensions or other retirement savings plans. Retirement benefits are intended to be paid out over a long-term period, reflecting the company's commitment to providing financial support to employees even after they have ended their active employment. These benefits can be based on the employees' salary, years of service, or other formulas, and they are critical components of an employee's total remuneration package. In contrast, the other options listed—wages, commissions, and bonuses—are generally classified as short-term employee benefits, as they are typically paid out within a year. Wages and commissions refer to regular earnings for work performed in the short term, while bonuses are usually one-time payments tied to performance within a specific reporting period. Therefore, the only choice that aligns with the description of long-term benefits is retirement benefits.