Amal Ltd 2017-18

Amal Ltd | Annual Report 2017-2018 Note 29 Employee Benefit Obligation (continued) The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the Balance Sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change as compared to the prior year. Risk Exposure Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below: i) Interest rate risk A fall in the discount rate which is linked to the G Sec. Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset. ii) Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan’s liability. iii) Investment risk The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities and other debt instruments. iv) Concentration risk Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines. The weighted average duration of the defined benefit obligation is 5 years (March 31, 2017: 5 years). The expected maturity analysis of gratuity is as follows: ( ` 000) Particulars Less than a year Between 1 - 2 years Between 2 - 5 years Over 5 years Total Defined benefit obligation (gratuity) As at March 31, 2018 48 49 379 258 734 As at March 31, 2017 33 33 357 39 462 c) Other long-term benefits Long term compensated absences (Unfunded scheme) Leave encashment is payable to eligible employees who have earned leaves, during the employment and | or on separation as per the policy of the Company. Valuation in respect of leave encashment have been carried out by independent actuary, as at the Balance Sheet date, based on the following assumptions: Particulars Compensated absences 2017-18 2016-17 Discount rate 7.80% 6.50% Salary escalation rate 8.27% and 6.00% 7.00% Notes to the Financial Statements