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Anuradha Sehgal

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FAQ: Setting the discount rate for actuarial valuation

Posted by Anuradha Sehgal on 07-Aug-2017 10:36:00

Setting the discount rate is considered to be the most important aspect of any actuarial valuation. In this post, we have summarised some of the most common questions our clients and their auditors ask about choosing the right discount rate.

1) What is the correct way to set discount rate for AS 15, Ind AS 19 and IAS 19 valuations?

Setting the discount rate involves constructing yield curves from the raw trading data. As an overview, this involves calculating the yields-to-maturity using traded Government Securities. Different traded bonds will have different YTM, depending on the term of each bond and therefore yields would be different for each term. They would then need to be smoothed, interpolated and extraopolated to produce the full yield curve. The discount rate can be read off for the specific duration of Defined Benefit Obligation.

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Topics: Actuarial valuation, Discount rate, Actuarial assumptions

Discount rate for actuarial valuation as at 30 June 2017

Posted by Anuradha Sehgal on 10-Jul-2017 09:20:00

For many companies, this is the time to finalise their interim accounts for the first quarter of the current financial year. It is important to understand the movement in discount rate during this period to make an appropriate provision towards employee benefits liabilities.

Interim reporting is a standard exercise for most companies, either for internal purposes and, for listed companies, also to report to the Securities and Exchange Board of India (SEBI).

In order to make an appropriate provision at 30 June 2017 in respect of the employee benefit liabilities, it is essential to understand how the discount rate would have changed since the last actuarial valuation.

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Topics: AS 15, Ind AS 19, Discount rate, Actuarial assumptions, Economic update

Frequently Asked Questions about gratuity funding

Posted by Anuradha Sehgal on 19-Jun-2017 10:30:00

The topic of funding of gratuity scheme remains 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 postThis post sets out a list of frequently asked questions, from our own experience working with our clients:

1. My company's gratuity scheme is funded with LIC. Do we still need to get the actuarial valuation done for AS 15?

Yes, the fact that your gratuity is funded doesn't change anything as far as reporting under AS 15 is concerned. AS 15 is an assessment of your gratuity liabilities and how much you hold in assets to back them.

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Topics: Actuarial valuation, Gratuity valuation, Funding, Funding valuation

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