Why is Actuarial Valuation required?

Actuarial valuation is an accounting exercise performed to estimate future liabilities arising out of benefits payable to employees of a company like gratuity, pensions and provident funds. These benefits are not paid immediately, but accrue over the term of employment of the employee. Hence, they need to be estimated and a provision must be made in the book of accounts of the company.

What are the various accounting standards?

Actuarial valuations are mandated by various accounting standards such as IND AS 19, AS – 15(R) , US-GAAP, IFRS etc. Under these accounting standards, actuarial valuation is performed to estimate the liability and make provisions for the same in the balance sheet.

Where can I find the data format for actuarial valuation?

For actuarial valuation, employee data of a company is to be provided such as employee name, date of birth, date of joining, salary etc. Our data format is tailored as per the requirements of Schedule III of The Companies Act and is available on our website.

What are the services you provide?

Our wide range of actuarial services include annual actuarial valuation for gratuity, leave, pensions, medical benefits, provident fund, ESOP valuations, retirement benefit consulting, funding valuations and actuarial consulting.

Where can I find sample reports for IND AS 19 and AS 15?

Sample or model actuarial valuation reports can be obtained which are modelled based on the IND AS 19 and AS 15 accounting standards and contain a model of all the disclosures required under these accounting standards.

How to do actuarial valuation?

Actuarial valuation is performed by a qualified actuary to disclose employee benefit obligations for reporting companies as per various accounting standards such as IND AS 19, AS 15(R), US GAAP etc. This is performed for gratuity, leave, pension and other schemes. Contact us to find out how we can help you with the process.

Applicability of Actuarial Valuation for LLP entites : Actuarial Valuation for Gratuity, Leave and Pension

An LLP is classified under Indian accounting standards as a non-corporate entity, and actuarial valuation is applicable to LLP’s when they have to be audited – since accounting standards and guidelines issued by The Institute of Chartered Accountants of India (ICAI) are applicable to members of ICAI during the audit and attestation of the books of an LLP.

TABLE OF CONTENTS

Classification of LLPs and Non-Corporate Entities
No exemptions for Level-I Entities/LLPs
Exemptions available for Level II and Level II Entities/LLPs:

Classification of LLPs and Non-Corporate Entities

Depending on the nature of the LLP, certain exemptions can be applicable to LLPs in the disclosure requirements. These exemptions are also available to other non-corporate entities like registered firms, partnership firm, sole proprietorship firm, etc. As per ICAI criteria, non-corporate enterprises are classified based upon their nature into Level-I, Level-II and Level-III.

No exemptions for Level-I Entities/LLPs

For Level-I LLPs and non-corporate entities, no exemptions are available and full disclosure is required under actuarial valuation. Level-1 non-corporates include those entities with listed equity shares/bonds/NCDs banks and insurance enterprises carrying out insurance business, and all entities with turnover of more than Rs. 50 crores, or entities having borrowings of more than Rs 10 crores, and also holding and subsidiary companies of an entity that satisfies any of the earlier conditions.

Exemptions available for Level II and Level II Entities/LLPs:

Level-II entities include businesses with turnover of more than Rs 1 crore, but less than Rs 50 crore in the preceding financial year, entities having borrowings of more than Rs 1 crore but less than Rs 10 crores, and also holding or subsidiary companies of any entity satisfying the earlier conditions. Level-III entities includes all other entities that do not satisfy Level-I and Level-II criteria.

For Level-II and Level-III non-corporate entities/LLPs, certain exemptions are available under AS-15(R).

In respect of Defined Benefit Plans:

Level II and Level II LLPs need not apply the recognition and measurement principles laid down in Paragraph 50 to paragraph 116 of AS-15(R).

However, the accrued liability arising out of the employee benefit plan should be calculated using actuarial principles of Projected Unit Credit (PUC) Method, and the discount rate used should be with reference to market yields on government bonds at the balance sheet date.

Furthermore, for Defined Benefit Plans, Level II and Level II LLP have also exemption from presentation and disclosure requirements. They need not apply the presentation requirements as per paragraph 117 and paragraph 118 of AS-15(R), and also are exempt from the disclosure requirements under paragraphs 119 to 123 of AS-15(R).

The actuarial assumptions used must be disclosed as per the requirements of paragraph 120(l).

In respect of Other Long Term Employee Benefits:

In valuation of Other Long-Term Employee Benefits, Level II and Level II LLPs are exempt from recognition and measurement principles laid down in paragraphs 129 to 131 of AS-15(R).

However, the accrued liability arising out of the employee benefit plan should be calculated using actuarial principles of Projected Unit Credit Method, and the discount rate used should be with reference to market yields on government bonds at the balance sheet date.

In respect of Termination Benefits:

Level II and Level II LLPs need not discount termination benefit amounts falling due more than 12 months after the balance sheet date. In normal course without this exemption, the amounts falling outside 12 month period are discounted using the discount rate factor.

In respect of Defined Contribution Plans:

Level II and Level II LLPs need not discount contribution amounts falling due more than 12 months after the balance sheet date.

Is Actuarial Valuation required for LLP?

Modified on: Sat, 26 Sep, 2020 at 12:47 AM