The effects of projected mortality quotients on accounting Defined Benefit plans under International Accounting Standard 19

Bouwman, R.C. (2008) The effects of projected mortality quotients on accounting Defined Benefit plans under International Accounting Standard 19. Master's Thesis / Essay, Industrial Engineering and Management.

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Abstract

International Accounting Standard (IAS) 19 prescribes the accounting for employee benefits. For pension schemes this includes certain calculations which involve mortality assumptions. The past decades Dutch life expectancy showed an upward trend, caused by decreased mortality rates. It can be expected that this trend will continue, causing future life expectancy to rise even further. In 2007 the Dutch association of actuaries published a projection table, which takes future mortality rate development into account. In this thesis the method of construction of the projection table will be looked into, as well as determining the effect of the projection table on the calculations prescribed in IAS 19. The projected mortality quotients lead to a large increase of life expectancy for especially men. As a consequence of these higher life expectancies the cost of old-age pension increases, which can result in effects up to 30%. Fortunately this effect can be limited by a decrease in cost for widower's pension. Companies that offer employees old-age pension and widower's pension will have to recognize a larger Pension Expense in the Profit and Loss statement. The increase of the Pension Expense will depend on the specific situation of the employer but can be as large as 10-15%.

Item Type:	Thesis (Master's Thesis / Essay)
Degree programme:	Industrial Engineering and Management
Thesis type:	Master's Thesis / Essay
Language:	English
Date Deposited:	15 Feb 2018 07:28
Last Modified:	15 Feb 2018 07:28
URI:	https://fse.studenttheses.ub.rug.nl/id/eprint/8554

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