Retirement plans are an important aspect of an employee’s benefits package, and it’s crucial for businesses to have a clear understanding of the costs associated with these plans in the Philippines. There are several types of actuarial valuations used to determine the expected cost of retirement plans: PAS 19 Valuation, PFRS for SMEs No. 28 Valuation, and Funding Valuation. In this article, we will explain the key differences between these three types of valuations, their specific requirements, and how they can benefit your company’s retirement plans in the Philippines.
PAS 19 Valuation is an accounting valuation that is used to determine the recognized cost of employee benefits in the financial statements. It is governed by Philippine Accounting Standard (PAS) 19, “Employee Benefits,” and is required by the SEC for all companies that do not fall under the category of small and medium-sized entities (SMEs) and are required to file their financial statements with the SEC. PAS 19 Valuation is based on the principles of accounting and is primarily focused on providing a true and fair view of the financial position of the company.
PFRS for SMEs No. 28 Valuation is also an accounting valuation that is used to determine the recognized cost of employee benefits in the financial statements, but it is specifically designed for small and medium-sized entities in the Philippines. It is governed by PFRS for SMEs No. 28, “Employee Benefits,” and it simplifies the accounting requirements of PAS 19, but it doesn’t reduce the need of an actuarial valuation to determine the cost of the employee benefits.
Funding Valuation is a financial valuation that is used to determine the amount of assets needed to fully or partially fund a retirement plan in the Philippines. It is based on the principles of actuarial science and it serves as a guide to management to know how much they should contribute to the company’s retirement trust fund. Funding Valuation is the type of valuation that a company needs to do when setting up a retirement plan in the Philippines and it is also used as a basis for applying the tax deductibility of the company’s contribution to the retirement trust fund for the year.
In conclusion, PAS 19 Valuation, PFRS for SMEs No. 28 Valuation, and Funding Valuation are all important types of actuarial valuations for determining the expected cost of retirement plans in the Philippines. Each type of valuation serves a different purpose and has specific requirements. PAS 19 and PFRS for SMEs No. 28 valuations are accounting valuations that determine the recognized cost of employee benefits in the financial statements, while Funding Valuation is a financial valuation that serves as a guide to management to know how much they should contribute to the company’s retirement trust fund. It’s important for businesses to understand the different types of valuations and their specific requirements in order to ensure compliance and make informed decisions about their retirement plans in the Philippines.