Actuarial valuation and reporting of a pension scheme under IAS 19 is significantly more complex than other employee benefit plans. Several issues, which after often ignored, need to be understood and allowed for when reporting for pension schemes.
It is the end of another financial year and time for companies to prepare their year-end financial statements for FY 2017-18. The discount rate for actuarial valuation as at 31 March 2018 is now known. This post explains the movement in the interest rate curves over the FY 2017-18 and how that is expected to […]
The amendment to Payment of Gratuity (PG) Act, 1972, has finally come into force with the notification in the Gazette of India on 29 March 2018. This amendment has led to an increase in gratuity limit to Rs 20 lakhs, from Rs 10 lakhs earlier. The timing of this notification means that companies will need […]
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 […]
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 […]
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 […]
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), […]
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.
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. Update: The increase in gratuity limit has come into […]
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 […]