US GAAP Standard

 

Is a standard that has been dictated by the supervision of the banks in order to maintain a controlled system in which banks and credit companies in Israel perform measurement and recognition of their obligations for employee benefits in a uniform and transparent method.
Similar to the IAS 19 standard, which is part of the International Accounting Standard -IFRS, the standard deals with the measurement and recognition of liabilities and assets in terms of fair value.

In light of the fact that human capital is one of the main cost components of the entities in the banking system, these are significant obligations that have a critical weight in the banks' balance sheets.
In light of this, an actuarial assessment is required, while continuously monitoring the main model assumptions and analyzing the balance sheet items.

The essence of the actuary's work in the process of assessment of employee benefits:

The essence of the standard is the presentation of the benefits in terms of present value, also known as the "fair value" method, which is calculated on an actuarial basis and takes into account, among other things, future salary increases, entitlement to receive compensation, employee turnover rate.
The measurement is made on the basis of discounting the expected future cash flows, according to an interest rate that is based on government bonds plus a spread of US corporate bonds.
 

The calculation of liabilities is done on an actuarial basis and takes into account the value of the payment in the future.
The flow of payments expresses the probability of leaving under the conditions of eligibility.

In order to estimate the fair value of the liability, the future increases in the amount of the benefit must be taken into account and the flow of payments must be capitalized as of the balance sheet date.

In the event of a commitment to severance pay (a funded benefit) to the employer, the assignments, which have been accumulated in insurance policies, pension funds, and provident funds, are used as plan assets to cover the liabilities.

There is a wide variety of benefits that require an actuarial evaluation, among them:

• Severance payment, unless employees are under DC (defined contribution) plan - "seif 14"

• Seniority grants/retirement grants

• Redemption of sick days

• Vacation (if the accruals exceed twice the annual quota)

• Payments to pensioners (holiday pay, newspaper, other benefits) budget pension

• compensated absences (paid vacation and sick leave)

• Retirement benefits, including pensions and lump sum payments

• Post-employment medical and life insurance benefits

• long-service or sabbatical leave

• 'Jubilee' benefits

• Deferred compensation programs

• Termination benefits.
   

Our company has rich experience in accompanying banking entities in the positions of operating actuary and validating actuary.