EOSB actuarial valuation in Saudi Arabia, under IAS 19 and IPSAS 39

Under IAS 19, a benefit is defined benefit when the entity's obligation is to provide an agreed amount of benefit rather than to pay a fixed contribution. Gulf end-of-service gratuity is a formula-based lump sum linked to final salary and years of service, paid by the employer, so it is a defined benefit obligation. Measuring it at the amount payable at reporting date ignores future salary increases, the probability that employees leave before vesting and the time value of money. IAS 19 requires all of these to be reflected using the projected unit credit method.

Each employee's projected benefit at exit is estimated using expected salary growth and the benefit formula. That projected benefit is attributed to years of service, so the portion earned to date is the accrued benefit. It is then multiplied by the probability of the employee reaching each possible exit point (resignation, termination, retirement, death) and discounted back to the valuation date. The sum across all employees is the defined benefit obligation. The current service cost is the value of one additional year of attribution, and the interest cost is the unwinding of the discount.

IAS 19 requires the rate on high-quality corporate bonds in the currency of the obligation, or government bonds where there is no deep corporate bond market. For Saudi riyal obligations we typically construct a yield curve from Saudi government sukuk and bonds, matched to the duration of the liability, and document why a corporate bond market is not deep enough. We supply the derivation so auditors can trace the rate to observable market data.

Attrition (withdrawal) is usually the most significant demographic assumption because a large proportion of Gulf workforces leave before retirement and gratuity is paid at exit. We derive attrition from your entity's historical leaver data, split by age or service band and by nationality where the pattern differs. Mortality has a small effect for working-age populations; we use standard tables such as GAM-94 or the UK ELT tables with appropriate adjustments, and disclose the choice. Retirement age follows the Social Insurance Law and company policy: 65 for Saudi employees who first joined social insurance from 3 July 2024, a transitional age between 58 and 65 for some existing contributors, and the contract terms for non-Saudis, who are outside the pension branch.

Service cost and net interest are recognised in profit or loss. Actuarial gains and losses, arising from changes in assumptions and from experience differing from assumptions, are recognised in other comprehensive income and are never recycled to profit or loss. Our report separates experience adjustments from assumption changes so the OCI movement is fully explained. This applies to post-employment benefits such as end-of-service gratuity. For other long-term benefits, such as long-service awards and accumulating leave, IAS 19 requires remeasurements in profit or loss, and our report presents them separately.

Yes, if it changes the benefit formula or vesting terms. Such a change is a plan amendment and creates a past service cost that is recognised immediately in profit or loss. Curtailments and settlements, for example large redundancy programmes or transfers of employees to another group entity, are also events that require a remeasurement at the event date. We advise on the accounting and update the valuation.

IPSAS 39 Employee Benefits is drawn from IAS 19, so the obligation is measured the same way: the projected unit credit method, with financial and demographic assumptions and a qualified actuary encouraged for the measurement. Two differences matter in practice. First, the discount rate: IAS 19 points to high-quality corporate bonds, while IPSAS 39 requires a rate that reflects the time value of money, set with judgement by reference to government bonds, high-quality corporate bonds or other financial instruments, consistent with the currency and term of the obligation. For Saudi government entities this is normally a curve built from Saudi government sukuk and bonds. Second, presentation: remeasurements are recognised directly in net assets/equity rather than in other comprehensive income, and service cost and net interest go to surplus or deficit. Our IPSAS 39 report uses that terminology and the IPSAS disclosure structure, so it drops into accrual-basis financial statements without rework.

Annually for year-end reporting. For interim periods we provide roll-forward estimates that update the obligation for service cost, interest, benefits paid and any material change in the discount rate, which satisfies most auditors for quarterly reporting. Entities with significant workforce changes or volatile discount rates may require a full interim valuation.

We need an employee census at the valuation date (identifier, date of birth, date of joining, nationality, basic salary and allowances forming the gratuity base, and grade), a leaver file covering the last three to five years, benefits paid during the year and the HR policy on gratuity. Once we have clean data, we issue the report in 3 working days on average, and our data request template and validation checks make subsequent years faster still.

Entities reporting under IFRS as endorsed by SOCPA must measure end-of-service benefits under IAS 19 using the projected unit credit method with actuarial assumptions. IAS 19 encourages, but does not require, the involvement of a qualified actuary. In practice, auditors of listed, SAMA-regulated and larger private entities expect a formal valuation report that supports every assumption.

We issue a quotation after a short scoping call. The fee depends on headcount, the number of entities and benefit plans, data quality, whether group or IPSAS 39 reporting applies, and whether interim roll-forwards are needed.

Yes. The end-of-service award under the Saudi Labor Law is an employer obligation that sits alongside GOSI contributions. It applies to Saudi and non-Saudi employees in the private sector and is valued for both.

The amendments that took effect in February 2025 formalised the resignation process and shortened the notice period for Saudi employees on indefinite contracts, but did not change the award formula in Articles 84 and 85. They do affect how leavers should be classified between resignation and termination in the attrition data.

For part of the workforce, yes. The Social Insurance Law that took effect in July 2024 sets a retirement age of 65 for new contributors and raises it gradually for some existing contributors, so a 2026 valuation should apply the retirement age that matches each Saudi employee's cohort.

We run in-house IAS 19 workshops for client finance teams, built around the entity's own valuation, assumptions and disclosure note. We do not run public or individual certification courses.