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 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 […]
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 […]
Employee attrition rate is an important assumption that can have significant impact on the actuarial liability of employee benefit schemes. An incorrect assumption will invariably lead to erroneous liability to be recorded in the balance sheet. In our last post, considerations for setting the salary escalation rate were discussed. In the same post, we also provided some […]
Salary escalation rate is arguably the second most significant assumption used in an actuarial valuation after the discount rate. However, unlike the discount rate, the reporting enterprise has a much greater role to play in setting this assumption. It is important to understand the complexities involved. Actuarial reporting requirements for employee benefit schemes in India, […]
The mechanics of funded gratuity schemes remain unclear for many companies, due to a lack of regulatory framework and a general lack of understanding of actuarial principles. We have examined the issue to consider for gratuity scheme funding in our prior post. This post sets out a list of frequently asked questions about funded gratuity schemes; i.e. […]
Many employers choose to fund their gratuity liabilities by paying regular contributions to an insurance company. However, employers often do not fully understand what they gain from gratuity funds and what to expect from these arrangements.
Advanced actuarial services go beyond the usual realm of actuarial reports or statutory certificates. The ability of actuaries to predict future uncertain events and assess their financial impact can help deliver significant benefits to any organisation. Actuaries are good at making predictions about future uncertain events, and assessing the financial impact of this uncertainty. As […]