MS AR 2018 (1)

5.7 Employee benefits
Post-employment benefit:
The Company’s post employment benefit comprises of a defined benefit plan. The defined benefit plan represents
an unfunded gratuity scheme for all its permanent employees subject to a minimum qualifying period of service
according to the terms of employment. The plan defines the amount which an employee will receive on or
after retirement, usually dependent on one or more factors such as age, years of service, and compensation.
Provision is made annually to cover obligation under the scheme.
The liability recognized in the statement of financial position in respect of the defined benefit plan is the present
value of the defined benefit obligation at the end of the reporting period less the fair value of any plan assets, (if
any). The defined benefit obligation is calculated annually by an independent actuary using Projected unit credit
(PUC) actuarial cost method. The present value of the defined benefit obligation is determined by discounting
the estimated future cash flows using discount rate as determined by reference to market yields on Government
bonds. Latest valuation was conducted on June 30, 2018. All actuarial gains and losses are recognized in other
comprehensive income as they occur.
Following risks are associated with the scheme:
Final salary risk:
The risk that the final salary at the time of cessation of service is greater than what we assumed. Since the benefit
is calculated on the final salary (which will closely reflect inflation and other macroeconomic factors), the benefit
amount increases as salary increases.
Demographic risk:
a) Mortality risk - The risk that the actual mortality experience is different than the assumed mortality. This effect
is more pronounced in schemes where the age and service distribution is on the higher side.
b) Withdrawal risk - The risk of actual withdrawals experience is different from assumed withdrawal probability.
The significance of the withdrawal risk varies with the age, service and the entitled benefits of the
beneficiary.
Short-term employee benefits:
A liability is recognized for benefits accruing to employees in respect of wages and salaries and other shortterm
employee benefits in the period the related service is rendered at the undiscounted amount of the benefits
expected to be paid in exchange for that service.
5.8 Taxation
Current:
Provision for current taxation is based on taxable income at the applicable rates of taxation after taking into
account tax credits and tax rebates, if any. Income tax expense is recognized in statement of profit or loss except
to the extent that it relates to items recognized directly in equity or in other comprehensive income.
Prior:
This includes adjustments, where considered necessary, to existing provision for tax made in previous years
arising from assessments framed during the period for such years.
Deferred:
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences
arising from differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognized for all
98 MUGHAL IRON & STEEL INDUSTRIES LIMITED