Question ID : 32758

Accounting of Defined benefit plans

According to para 51 of the AS 15, Accounting by an enterprise for defined benefit plans involves discounting that benefit using the Projected unit Credit method (These lines are coloured in the attached document for your convenience). The standard specifies that the actuarial valuation method to be followed is Projected Unit credit method to determine the present value of its defined benefit obligations and the related current service cost and, where applicable, past service cost. Let us know is there any provision where it allows an enterprise to calculate the Gratuity based on the management's workings/calculations (without the use of Actuary).

Ind-As 19 para -66 - The ultimate cost of a defined benefit plan may be influenced by many variables, such as final salaries, employee turnover and mortality, employee contributions and medical cost trends. The ultimate cost of the plan is uncertain and this uncertainty is likely to persist over a long period of time. In order to measure the present value of the post-employment benefit obligations and the related current service cost, it is necessary: (a) to apply an actuarial valuation method (see paragraphs 67–69); (b) to attribute benefit to periods of service (see paragraphs 70–74); and (c) to make actuarial assumptions (see paragraphs 75–98). HENCE WITHOUT ACTUARY IT IS NOT POSSIBLE ....IT WILL BE APPLIED IN CASE AS-15 as well