Gratuity Valuation

raveesha · #21 01-07-2009, 02:46 PM

Dear Friend

This is first time hearing.

If your organisation completed five years you can attach with LIC of India. Every financial year you have to submit Employees detail of Joining and left with existing basic+da wages.Accordingly they will send you yours amount.

Reagrds

RAVEESH

gcgore · #22 01-07-2009, 03:23 PM

If you having the group gratuity policy from LIC You get valuation free done by LIC

smita244 · #23 01-07-2009, 05:02 PM

thank you for ur advise.

Thanks rose for the contact number.

rgds,
Smita

vkokamthankar · #24 03-07-2009, 04:34 PM

No response on my queries ????
Experts please respond

Quote:

Originally Posted by vkokamthankar

Experts please advise.

After reading the posts I have many queries and I request citehr members with real and complete knowledge to guide all members on following points:

1. I am assuming that gratuity payment provision is to be made in annual books of accounts every year. Is it ok to make provision of actual gratuity payable as on 31st March to all the eligible employees onboard.

2. In case company is having gratuity trust and having tieup with insurance company and paying regular primium to them, is there a need to make seperate provision again.

3. In case provision is to be made as per point no. 1 above, it will be a huge provision but it is a simple arithmatic calculation and there is no need of actuary and expert.

4. How acturial calculation is different? Will the provision be higher or lower than point no. 1 above? Why? and How?

Experts please educate.
Thanks & Regards

deepa.sudhakar · #25 06-07-2009, 03:53 PM

After reading the posts I have many queries and I request citehr members with real and complete knowledge to guide all members on following points:

1. I am assuming that gratuity payment provision is to be made in annual books of accounts every year. Is it ok to make provision of actual gratuity payable as on 31st March to all the eligible employees onboard.
Provisioning has to be done for all emplyees including those who have not completed 5 years of service and should be accruing every month.

2. In case company is having gratuity trust and having tieup with insurance company and paying regular primium to them, is there a need to make seperate provision again.
Provisioning in the books of accounts may be done based on the acturial valuation and also considering other assumptions such as no of new joinees, attrition, increment % etc., If there is a tie up with the insurance company the acturial valuation will be done by them but the assumption should be given to them

3. In case provision is to be made as per point no. 1 above, it will be a huge provision but it is a simple arithmatic calculation and there is no need of actuary and expert.
Expert advise is required coz the liability will be calculated after the assumptions and it is very difficult for us to calculate. As a statuatory requirement acturial valuation should be approved the the actuary.

4. How acturial calculation is different? Will the provision be higher or lower than point no. 1 above? Why? and How?
The acturial valuation and a simple gratuity calculation will definitely be different coz the acturial value is calculated after considering the assumptions.

Hope this clarifies

welcomeumesh · #26 07-07-2009, 12:19 AM

Dear friend,

Beside gratuity of any other hr expense must be considered for provision in accounts books. So that accounts department may correctly get the accrued expense in the coming year. Provisions may also be taken for leave encashment, bonus, unpaid salaries etc. Needless to say that it's demand of systematic accounting standards.

Best regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)

vkokamthankar · #27 07-07-2009, 06:29 PM

Thanks deepa.sudhakar,

Your response is really elaborate and having depth.

Still I have a doubt and request your response / clarification.

1) Correct me if I am wrong. As I understand, amount of provision for gratuity payable as on 31st March will be the actual gratuity payable as on 31st March to all the employees on board. ( In short in case all the employees onboard are checked out on 31st March, that will be the amount of gratuity payable) This calculation is simple arithmatics.
To calculate as above you do not need actuary. probably Actuary or Chartered Accountant is needed to certify that correct amount is provisioned for.

2) In case my statement (1) above is correct then amount of gratuity calculated by X or Y or Actuary or Chartered Accountant should be the same.

Thanks & Regards

deepa.sudhakar · #28 08-07-2009, 05:18 PM

Hi,

The calculation that you are talking about is discontinounce liability and it is only an input to calculate the acturial value. This will be the actual amout of gratuity payable.

The acturial value will be usually lesser than the discontinounce liability, the net liability will be calculated at the end of the FY and it becomes the responsibility of the organisation to keep it completly funded.

Acturial Valuation parameters / Assumptions are usually mortality rate, attrition rate, salary inflation, discount rate, recognition of acturial gain or loss and also the method of valuation. The most commonly used method as prescribed by the institute of acturies and AS 15 is Unit Credit Method.

Calculation of Fair value of the assests should also be done.

This definitly requires an experts intervention.

Regards,

Deepa

vkokamthankar · #29 09-07-2009, 07:17 PM

Thanks deepa.sudhakar

ani23 · #30 10-07-2009, 04:44 PM

I think that gratuity calculation is required only when the employee is going to leave the organisation.