We provide services for actuarial valuations of Employee's Benefits as per statutory requirement of Accounting Standard 15 (revised) issued by Institute of Chartered Accountants of India. of India. For most of the companies AS 15 (revised) requires Actuarial Valuation of :
- Actuarial valuation of Gratuity Liability
- Actuarial valuation of Leave encashment Liability
- Actuarial valuation of earned leave/ leave benefits
- Actuarial valuation of sick leave benefits
- Actuarial valuation of Pension
- Actuarial valuation of Interest rate guarantee for provident fund
- Actuarial valuation of LTC
- Long term service awards
- And other defined benefits plan
This firm is headed by Consulting Actuary Shri. Ashok Kumar Garg. Mr. Garg is Fellow of Institute of Actuaries of India (Fellowship No 00057) and Associate of Insurance Institute of India.
Since 2006 Mr. Garg is providing actuarial consultancy for Employee Benefits of the Defined Benefit Nature for compliance of accounting standards to hundreds of companies in all sectors of economy including government, semi government companies and MNCs across the entire country. Our certificates have been accepted by all Auditor/ CA/ CS etc.
We are having highest retention and customer satisfaction as our motto is "customer delight".
Frequently Asked Questions (FAQ)
It is required for defined benefit scheme of the company as per AS15 (Rev 2005) and Ind AS19.
Within Indian accounting framework, AS 15 (revised, 2005) deals with the accounting of employee benefits. AS 15 requires that actuarial valuation should be done in respect of following employee benefits:
2. Leave benefits (for both encashable and non-encashable leaves)
3. Pension schemes (including both defined benefit and defined contribution schemes which guarantee a minimum investment return)
4. Exempt Provident Fund (those PFs managed in-house and not by EPFO)
5. Long-term service awards (e.g. awards given on completion of certain number of years of service or at retirement)
6. Bonus and profit-sharing arrangements
7. Leaves for leisure and travel purposes
8. Sick Leave
Let us assume that a company generates some profits at the end of a year of its operations. Now any non actuarial or even non accounting professional will say depreciation needs to be provided; if it is already not provided. Similar is the case for employees liabilities e.g. gratuity, leave encashment etc.
Depreciation can be calculated by the technical expert who knows about that particular machinery. Similarly employees liability accrued during a year will be calculated by an Actuary by performing Actuarial valuation.
Let us consider ‘Gratuity’ first. The similar considerations are applicable broadly for leave encashment liabilities. As gratuity liability accumulates due to service rendered by the employees during the year. This liability also increases on account of following reasons listed below:
Increase in salary and increase in past service.
Time period of retirement gets reduces by 1 year
There are other factors also, but not explained here.
An Actuary through actuarial valuation tries to estimate actuarial present value of accrued gratuity normally payable on retirement by using appropriate discount rate, salary growth rate etc.
Gratuity is payable on exit after 5 years of service, actuarial valuation takes care of this contingency also with the help of attrition rates.
Finally gratuity is payable on death also irrespective of length of past service. Actuary during actuarial valuation applies appropriate mortality rates to provide for financial effect of likelihood of earlier payment on death of an employee.
It should be appreciated that actuarial liability which will be arrived through actuarial valuation will increase on decreasing discount rate and increasing salary growth rate and vice versa.
1. A liability in respect of the benefits in company's balance sheet
2. An expense in respect of the benefits in company's P&L account
Salary growth rate: 5%
Discount Rate (yield on long term government security) :8%
Retirement Age :60 Years
Past Service of X :5 Years
Salary per month of X :26,000/- (INR)
Accrued Gratuity :15/26 X 26,000 X 5 = Rs 75,000
Actuary will actuarially discounts this amount of Rs 75000/- for a further period of 5 years taking into account probability of death, attrition, discount rate and salary growth rate etc.
This may come near about Rs 65,000/- for Discount Rate 8% and Salary Growth Rate 5%
Excerpt of foot note from LIC of India certificate which exists in every certificate issued by LIC of India itself claims the same. This excerpt is reproduced here in below for ready reference:
“Note: The above report is not certification under AS-15 revised 2005 read with Actuaries act, 2006. It is simply a report generated to help companies for proper accounting of employees liabilities.”
Also LIC certificate is not signed by a qualified actuary.