Company Overview Financial Statements Notice Statutory Reports 67 Rudolf Atul Chemicals Ltd | Annual Report 2019-20 Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan’s liability. Investment risk The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments. Concentration risk The plan may expose the Company to a concentration of insurance market risk, as all the assets are invested with one insurance company and a default will wipe out all the assets. However, the probability of this is very less, as insurance companies have to follow regulatory guidelines. Expected contributions to post-employment benefit plans for the year ending March 31, 2020 are ` 9.26 lakhs. The weighted average duration of the defined benefit obligation is six years (2017-18: seven years). The expected maturity analysis of gratuity is as follows: (` lakhs) Particulars Less than a year Between 1-2 years Between 2-5 years Over 5 years Total Defined benefit obligation (gratuity) As at March 31, 2020 5.84 5.75 22.83 32.69 67.11 As at March 31, 2019 8.46 4.01 19.87 29.81 62.14 b) Defined contribution plans: The Company pays provident fund contributions to registered provident fund administered by the government at the rate of 12% of basic salary as per regulations. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan is of ` 17.66 lakhs (March 31, 2019: ` 14.38 lakhs). The Company is studying the legal position on the implications of the relevant judgement of the Supreme Court on applicability of provident fund on its various allowances and is in the process of expeditiously depositing related dues, if any. c) The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Mortality rates are obtained from the relevant data.
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