Application of the actuarial method in measuring provisions for future employee benefits
Application of the actuarial method in measuring provisions for future employee benefits

Summary/Abstract: Accounting regulations require enterprises to create provisions for future employee benefits. This applies in particular to provisions for long-term employee benefits, especially including the provisions for retirement gratuities and jubilee benefits. It is recommended to estimate such provisions using the actuarial method, which is based on financial mathematics, insurance statistics, demography and the risk theory. The role of the actuarial method in determining the value of provisions for future employee benefits, as well as the impact of changes in actuarial assumptions on current amounts of such provisions have been presented in this article. The results of changes in actuarial assumptions are the categories of actuarial gains and losses. These arise as an accounting effect of revaluation of provisions for employee benefits already existing at the balance sheet date. Besides establishing the carrying value of provisions for employee benefits and their consequences for the costs (revenue) of enterprises, possible ways for recognizing such provisions in the accounting books have also been indicated.

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