Page 214 - BCML AR 2019-20

FINANCIAL STATEMENTS

Notes forming part of the Standalone Financial Statements

Note No. : 36 Other disclosures (contd.)

(c) Risks related to defined benefit plans:
The main risks to which the Company is exposed in relation to operating defined benefit plans are :
(i) Mortality risk:

The assumptions adopted by the Company make allowances for future improvements in life expectancy. However, if life expectancy
improves at a faster rate than assumed, this would result in greater payments from the plans and consequently increases the plan’s
liabilities. In order to minimise this risk, mortality assumptions are reviewed on a regular basis.

(ii) Market and liquidity risks:
These are the risks that the investments do not meet the expected returns over the medium to long term. This also encompasses
the mismatch between assets and liabilities. In order to minimise the risks, the structure of the portfolios is reviewed and asset-
liability matching analysis are performed on a regular basis.
(d) Asset - liability management and funding arrangements
The trustees are responsible for determining the investment strategy of plan assets. The overall investment policy and strategy for
Company’s funded defined benefit plan is guided by the objective of achieving an investment return which, together with the
contribution paid is sufficient to maintain reasonable control over various funding risks of the plan.
(e) Other disclosures :

(i) Following are the assumptions used to determine the benefit obligation:
Discount rate:
The yield of government bonds are considered as the discount rate. The tenure has been considered taking into account the past
long term trend of employees’ average remaining service life which reflects the average estimated term of the post - employment
benefit obligations.
Rate of escalation in salary :

The estimates of rate of escalation in salary, considered in actuarial valuation, take into account inflation, seniority, promotion and
other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.
Rate of return on plan assets:

Rate of return for the year was the average yield of the portfolio in which Company’s plan assets are invested over a tenure equivalent
to the entire life of the related obligation.
Attrition rate :
Attrition rate considered is the management’s estimate based on the past long- term trend of employee turnover in the Company.

(ii) The Gratuity and Provident Fund expenses have been recognised under “ Contribution to provident, gratuity and other funds” and
Leave Encashment under Salaries and Wages under Note No. 30 - Employee benefits expense.

212 | Balrampur Chini Mills Limited