What is Actuarial Gains and Losses?
Actuarial gains and losses are the changes in the present value of defined benefit pension obligations and plan assets that arise from changes in actuarial assumptions (such as discount rate, salary growth or mortality) or from differences between expected and actual experience. Under IAS 19, they are recognized in other comprehensive income.
How It Works
- Compare actuarial assumptions used last period to those used this period.
- Calculate the resulting change in pension obligation and plan asset values.
- Recognize the change in other comprehensive income, not in profit or loss.
- Disclose the components in the pension note.
Saudi Context
Saudi companies with end-of-service benefit obligations under Saudi labor law treat the obligation as a defined benefit plan and recognize actuarial gains and losses through OCI.
Example
If the discount rate used to value pension liabilities falls from 4.5 percent to 4.0 percent, the present value of the obligation rises, producing an actuarial loss recognized in OCI.