A Gratuity Valuation Report is a mandatory requirement for your annual statutory audit in India. Because gratuity is a future liability that depends on how long an employee stays and their future salary, you cannot simply “guess” the amount. You must use a scientific, actuarial calculation to ensure your balance sheet reflects the “True and Fair” value of what you owe your employees.
At KRPR, we coordinate with certified actuaries to provide these reports, ensuring they meet the specific requirements of your auditor and the relevant accounting standards.
Service: Gratuity Valuation Report
Why is this valuation mandatory?
If your company has 10 or more employees, the Payment of Gratuity Act, 1972, makes it a legal obligation to pay gratuity to those who complete 5 years of service. Auditors require an actuarial report to verify that you have set aside enough money (provisioning) to meet these future payouts.
| Feature | AS 15 (Revised) | Ind AS 19 |
| Applicability | Small and Medium-sized unlisted companies. | Listed companies and large entities with high net worth. |
| Gain/Loss Reporting | Any change in valuation goes straight to the P&L Account. | Changes go to Other Comprehensive Income (OCI), so they don’t hit your net profit. |
| Complexity | Standard reporting. | Requires advanced Sensitivity Analysis and 10-year cash flow projections. |
What is covered in the report?
Our actuary uses the Projected Unit Credit (PUC) Method, which is the gold standard required by Indian accounting rules. The report includes:
-
Present Value of Obligation (PVO): The current value of all future gratuity payments you are expected to make.
-
Service Cost: The cost of the gratuity “earned” by your employees during the current year.
-
Interest Cost: The interest accrued on the previous year’s liability.
-
Actuarial Assumptions: Detailed notes on the discount rates, salary growth rates, and attrition (leaving) rates used for the calculation.
What is required to start?
To get an accurate report, we need a simple Excel sheet with the following employee details as of the valuation date:
-
Date of Birth & Date of Joining: To calculate the age and total service years.
-
Monthly Basic Salary + DA: Since gratuity is calculated on these components.
-
Past Experience: Your company’s historical attrition (resignation) rate.
-
Previous Year’s Report: If you’ve had a valuation done before, for movement analysis.
Our 5-Step Actuarial Process
We simplify the complex math so you can focus on your business.
-
Data Review: We check your employee data for inconsistencies (like missing joining dates or incorrect salary figures).
-
Setting Assumptions: Our team helps you set realistic assumptions for Salary Growth and Attrition based on your industry.
-
Calculation: The actuary applies the discount rate (usually based on Government Bond yields) to determine the present value.
-
Draft Report: We share the initial numbers with you and your auditor to ensure everyone is aligned on the provisioning.
-
Final Certification: You receive a signed Actuarial Certificate that is ready to be attached to your audit file.
How long does it take?
-
Data Verification: 1–2 days.
-
Valuation & Drafting: 3–5 days.
-
Total Time: Usually under 1 week from the moment we have your final data.
What is the cost to get the Gratuity Valuation Report?
The cost of the report starts from Rs 13500