An actuarial valuation report is an actuary's report that measures what a company's promised employee benefits, such as gratuity, leave encashment, pensions or end-of-service benefits, are worth today. It gives the liability, the year's expense and the disclosures the company's accounting standard requires, and it is the evidence behind the employee benefit provision that the auditor reviews.
Key Takeaways
- Accounting, not labour law, requires it: Ind AS 19 and AS 15 in India, IAS 19 in the GCC.
- Not every entity or scheme needs one: non-company MSMEs under AS 15 may use another rational method, and leave that lapses, or will be used within 12 months, needs no actuarial valuation.
- It is more than one number: the obligation, the year's cost, actuarial gains and losses, assumptions and, under Ind AS 19 and IAS 19, sensitivities and a maturity profile.
- Data drives the timetable, not the calculation.
1. When does a company need an actuarial valuation report?
Benefit law creates the obligation; accounting standards require it to be measured actuarially, allowing for salary growth, employees leaving before they qualify and discounting:
- India, Ind AS 19: gratuity, pensions and long-term accumulating leave are valued actuarially.
- India, AS 15: companies, small and medium-sized ones included, value gratuity and long-term leave actuarially; non-company MSMEs may use another rational method. Our guide to the applicability of actuarial valuation on gratuity sets out the categories.
- Saudi Arabia and the GCC, IAS 19: Saudi end-of-service benefits, and most others in the GCC, are a defined benefit plan, measured actuarially (a few newer schemes, such as DIFC's DEWS, are defined contribution). IFRS for SMEs has its own, simpler section. See our EOSB valuation service.
- Group reporting: an overseas parent may also need IAS 19 or US GAAP (ASC 715) figures.
Leave schemes need one too, but not all of them. Leave that builds up over the years, to be taken or encashed later, and long-service leave are valued actuarially; leave used within 12 months, or that lapses, is not. The leave FAQ below has more, and so does our guide to which leave schemes need an actuarial valuation.
Post-retirement medical cover and long-service awards are valued the same way. Employee stock options fall outside these standards: they are valued under Ind AS 102 or IFRS 2 (or, for companies on AS, ICAI's Guidance Note on Accounting for Share-based Payments), in a separate ESOP valuation report.
How often: at every annual reporting date, and often enough that the amounts in the accounts do not differ materially from those that would be determined at the reporting date (Ind AS 19, IAS 19 and AS 15 alike). Under all three, a detailed valuation made earlier can be updated to the reporting date for material changes, including in interest rates; AS 15 allows one up to three years old. Interim results may need an update when discount rates or the workforce have moved.
Auditors usually ask once the provision is material, or when an employer not entitled to a simpler method has been booking gratuity as if every employee left on the balance sheet date: a shortcut that ignores discounting, leavers who will not qualify and salary growth, so it can be too high or too low.
2. What an actuarial valuation report contains, and what your auditor checks
A typical gratuity or EOSB report contains these items (labels differ slightly by standard):
| Item | What it shows | What the auditor checks |
|---|---|---|
| Defined benefit obligation (DBO) | Present value of benefits earned to date; the provision is this less any plan assets | Agrees to the provision; reasonable against last year and headcount |
| Current service cost | Cost of benefits earned in the year, charged to profit or loss | Consistent with salaries and headcount |
| Interest cost | Unwinding of the discount on the obligation | Roughly the opening DBO times the discount rate |
| Actuarial gains and losses | Effect of changed assumptions and of experience differing from them; in OCI under Ind AS 19 and IAS 19 for post-employment benefits such as gratuity and EOSB (in profit or loss for leave), and in profit or loss under AS 15 | Size explained by assumption changes and events in the year |
| Assumptions | Discount rate, salary escalation, attrition, mortality | Discount rate matches bond yields for the liability's term; salary escalation and attrition reflect the company's experience and plans; mortality uses a standard table such as IALM 2012-14 |
| Sensitivity analysis (Ind AS 19, IAS 19) | How the DBO moves if a key assumption changes | Direction and size are plausible |
| Maturity profile (Ind AS 19, IAS 19) | Expected benefit payments by year, and the liability's duration | Duration supports the discount rate's term |
| Reconciliations and disclosures | Opening to closing DBO and plan assets; the notes for the accounts | Benefits paid and fund values agree to payroll and fund statements |
Auditors also check that opening headcount, plus joiners, less leavers, gives the closing headcount valued, and question actuarial gains and losses most closely. See also seven issues in auditing actuarial valuation reports and our actuarial valuation page for India.
Note: The assumptions are the company's responsibility: the actuary proposes them and management approves them. See our governance framework for actuarial assumptions and the current discount curves for India and Saudi Arabia.
3. What data it needs, and how long it takes
The actuary normally needs:
- Employee data at the valuation date: employee code, date of birth, date of joining and the salary the benefit is based on, plus leave balances for a leave valuation. In India, the labour codes have been in force since 21 November 2025, and gratuity is based on wages as defined in section 2(88) of the Code on Social Security, 2020: where excluded allowances exceed half of total remuneration, the excess counts as wages. So send the full salary breakdown, not basic pay alone (see our guide to the new gratuity rules).
- Movements in the year: joiners, leavers with their exit reason, and benefits paid. Saudi EOSB pays resignations and terminations differently, so keep them apart.
- The benefit rules: your policy, including any enhancement over the statutory minimum.
- Plan assets: for a funded scheme, the insurer's or trust's statement for the year.
- Last year's report, if there is one, and your views on future salary increases and attrition.
For employee benefit valuations, we encourage you to send the data through Numex, our client portal, for safe data transfer and a quick turnaround, but you can send it by e-mail as well.
The calculation is rarely the slow part: most of the time goes on getting complete data and agreeing the assumptions, after which an Indian actuarial valuation report can be ready in as little as two hours. Allow longer for a first valuation: there is no earlier report to compare with, data gaps surface, and the auditor may ask for the opening position too.
4. Frequently asked questions
Which organisations in India need an actuarial valuation report?
Every company with gratuity or long-term leave obligations needs one, listed or unlisted and small and medium-sized ones included, whether it reports under Ind AS 19 or AS 15. Partnerships, LLPs, trusts, societies and other non-company entities need one too, unless they are MSMEs under ICAI's 2024 scheme, which may use another rational method. A subsidiary of an overseas group may also need IAS 19 or US GAAP figures for its parent's accounts. Our guide to the applicability of actuarial valuation on gratuity sets out the categories.
Which employers in Saudi Arabia and the GCC need an actuarial valuation report?
Employers reporting under IFRS (IAS 19) need one for defined benefit end-of-service benefits, such as Saudi Arabia's. Employers under IFRS for SMEs need one too, unless it would involve undue cost or effort; Section 28 then allows the amount payable if everyone left at the year end, undiscounted. A subsidiary of an overseas group may also need US GAAP figures for its parent's accounts. See our EOSB valuation service.
Do we need an actuarial valuation for leave?
Yes, for leave that can build up over the years, to be taken or encashed later or on leaving, such as accumulating privilege (earned) leave, and for leave awarded after long service. No, for carried-forward leave that will be used within 12 months or leave encashed at the end of the leave year: a provision for the unused days expected to be taken or paid is enough. Leave that lapses at the year end, as casual leave usually does, needs neither. Sick leave that carries forward does count, even if it is never encashed; the valuation allows for days that will go unused. See which leave schemes need an actuarial valuation and four issues in valuing leave schemes.
Is an actuarial valuation report the same as an actuarial certificate?
Usually, yes: in India it is a common name for the same report. It should still carry the assumptions, reconciliations and disclosures your standard requires, not just a closing figure.
Our gratuity is funded through an insurer. Do we still need one?
Almost always. The valuation measures the obligation, and the fund is set against it. Our FAQs on funded gratuity schemes explain why.
Can our statutory auditor prepare it?
No. For a company in India, section 144 of the Companies Act, 2013 bars its statutory auditor from providing actuarial services to it, its holding company or its subsidiaries, and auditor independence rules generally stop an auditor preparing figures it then audits. Ind AS 19 and IAS 19 encourage, but do not require, the use of a qualified actuary, and AS 15 expects that a company would normally use one. In practice auditors expect one, so they can review the report as the work of management's expert.
Commissioning your first actuarial valuation report?
A first valuation raises questions a repeat one does not, such as which benefits need valuing and how the opening position is handled with your auditor. See our sample actuarial reports, or tell us your plans and year end for a quote.
Topics: Employee Benefits, IFRS Valuation Services
Get new articles by e-mail
Loading the form…
, said: