Actuarial valuation of gratuity – sensitivity to assumptions and employee profile

actuarial valuation of gratuity sensitivity

What are the factors that will have an impact on the actuarial valuation of gratuity liability? What will be the magnitude of this impact? How will the gratuity liability impacted if the government increases gratuity limit to ₹20 lakhs? These are questions about the actuarial valuation of gratuity which almost every company’s management team wants […]

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Discount rate for actuarial valuation as at 31 Dec 2017

Discount rate chart

For many companies, this is the time to finalise their interim accounts for the third quarter of FY 2017-18. An understanding of the movement in discount rate during this period will help in making an appropriate provision towards employee benefits liabilities. Comparison of yield curves: 31 Dec 2017 vs 31 Mar 2017 The discount rate […]

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Actuarial valuation of pension liability in corporate transactions

actuarial valuation of pension in mergers and acquisitions

During corporate transactions, such as mergers and acquisition, actuarial valuation of pension and other employee benefit schemes is often ignored. The parties involved in the transaction spend most of their time and focus on ‘tangible’ aspects of the balance sheet. They end up taking ‘shortcuts’ or proxy approaches with disastrous consequences for their shareholders. I […]

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Superannuation fund taxation from employer’s perspective

Employee benefit

Before we start with taxation on superannuation fund, let us understand what exactly is a superannuation fund. Makes sense, so what is superannuation fund ? Cambridge dictionary defines “superannuation” as “money that people pay while they are working, so that they will receive payment when they stop working when they are old, or the payment they receive when they stop working” So, in simple words, superannuation funds refer to the […]

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Why don’t we need actuarial valuation of future salary?

actuarial valuation of employee benefits

We often get asked: is actuarial valuation of future salary needed? Or, why don’t we just calculate the present value of future salary and hold that as a liability, just like we do for gratuity benefits? Though AS 15 and Ind AS 19, both deal with the treatment of all employee benefits (except share based payments), […]

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Gratuity taxation – how it applies to your company

tax on gratuity

Almost all Indian companies (more than 10 employees) pay gratuity to their employees. Since, gratuity payments are an expense to the company, companies can claim tax-deduction on the same. You can read about Payment of Gratuity Act, 1972 here.

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Impact of increase in gratuity limit on actuarial liability

Gratuity Amendment Bill 2017

The Government of India is all set for an increase in gratuity limit to ₹20 lakhs. Companies reporting under Ind AS 19 will be affected more than those reporting under AS 15. This post provides the background on gratuity benefit and explains the accounting implications for companies. Payment of Gratuity Act 1972 Currently, the Payment of […]

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7 issues to consider for auditing actuarial valuation reports

Issues to consider for auditing actuarial valuation reports

The usual approach taken by auditors in reviewing and validating actuarial valuation reports requires a fundamental shift. Often the approach used fails to uncover significant errors. Audit of actuarial valuation reports is a challenging task. Reviewing a piece of work of such a technical nature is a significant ask from anyone who doesn’t have an […]

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Understanding actuarial gain or loss in AS 15 report

understanding actuarial gain or loss in AS 15 report

The concept of actuarial gain or loss is central to any actuarial valuation, but is widely misunderstood. A clear understanding of this concept could pre-empt a range of questions and free up time and resources tied up in the actuarial valuation process. An understanding of actuarial loss under AS 15, or ‘remeasurement’ under Ind AS […]

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FAQs about discount rate for actuarial valuation

setting the discount rate for actuarial valuation

Setting the discount rate for actuarial valuation correctly is often not very well understood by the reporting companies. This post summarizes some of the most common questions our clients and their auditors ask about choosing the right discount rate. For a complete overview about setting the discount rate, please refer to this post. 1) What is the […]

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