Hi Smitha,
The valuation certificate for statutory payments are not much important prior to Sathyam scam. The statutory payments are valued by the management themselves and make provisions in their books of accounts accordingly. After Sathyam scam, all statutory payments are focused for valuation certificate to ensure the accurals and deposits.
Not only gratuity but other statutory payments has to have valued certificate as per accounting standards. Now accounting standards are given formost importance after such a scam.
Sorry, I have no specific guy to do such certification. Normally they will charge nominal amount for certification not high as you said.
with warm regards,
T.Kumar
From India, Madras
1The valuation certificate for statutory payments are not much important prior to Sathyam scam. The statutory payments are valued by the management themselves and make provisions in their books of accounts accordingly. After Sathyam scam, all statutory payments are focused for valuation certificate to ensure the accurals and deposits.
Not only gratuity but other statutory payments has to have valued certificate as per accounting standards. Now accounting standards are given formost importance after such a scam.
Sorry, I have no specific guy to do such certification. Normally they will charge nominal amount for certification not high as you said.
with warm regards,
T.Kumar
From India, Madras
Hi smita,
Grautity valuation from actuary is compulsory if your company has employed more than 20 employees and also on some specific cases, please go through the AS15 (Accounting standards). if you r exempt from actuarial valuation, u can do normal arithmatic calculation(basic+da*26/15*no of yeas completed in service with the company).
Contact number
Name: Thanawala
Tel: (91 22) 6694 3311
From India, Madras
Grautity valuation from actuary is compulsory if your company has employed more than 20 employees and also on some specific cases, please go through the AS15 (Accounting standards). if you r exempt from actuarial valuation, u can do normal arithmatic calculation(basic+da*26/15*no of yeas completed in service with the company).
Contact number
Name: Thanawala
Tel: (91 22) 6694 3311
From India, Madras
Dear All,
Thank you so much for your replies. I am confused now, as per few replies gratuity valuation by a certified actuary is mandatory but few are saying you can get it done in the Company itself. Please advise.
Thanks,
Smita
Thank you so much for your replies. I am confused now, as per few replies gratuity valuation by a certified actuary is mandatory but few are saying you can get it done in the Company itself. Please advise.
Thanks,
Smita
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
From India, Pune
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
From India, Pune
Dear Smita
As far as I know if you have more than 20-25 employees, you need to do a gratuity valuation annually. This is mainly from an accounting perspective as they do it to for balance sheet and P&L preparation. It is preferred if you use an actuary to do the valuation.
Our company uses:
Thanawala Consultancy Services,
Swagatam, 1st Floor,
Khar,
Mumbai - 400 052, India
Tel. No : (91 22) 6694 3311
Fax No : (91 22) 6694 3322
Website: firm of actuaries and consultants,actuaries and consultants firm,actuariel and various employee benefit related consultancy services,employee benefits
They are reasonably priced and do a very systematic job.
regards
Rose S
From India, Mumbai
As far as I know if you have more than 20-25 employees, you need to do a gratuity valuation annually. This is mainly from an accounting perspective as they do it to for balance sheet and P&L preparation. It is preferred if you use an actuary to do the valuation.
Our company uses:
Thanawala Consultancy Services,
Swagatam, 1st Floor,
Khar,
Mumbai - 400 052, India
Tel. No : (91 22) 6694 3311
Fax No : (91 22) 6694 3322
Website: firm of actuaries and consultants,actuaries and consultants firm,actuariel and various employee benefit related consultancy services,employee benefits
They are reasonably priced and do a very systematic job.
regards
Rose S
From India, Mumbai
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
From India, Manipal
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
From India, Manipal
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
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
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)
From India, Delhi
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)
From India, Delhi
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
From India, Pune
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
From India, Pune
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
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
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Gratuity Valuation knowledge.pdf