Actuarial basis of accounting

The actuarial basis of accounting is the method used to calculate the amount of ongoing, periodic contributions to be made into a pension fund. This basis of accounting mandates that the amount of contributions plus the assumed investment earnings must at least equal the amount of payments made by the fund to pensioners. This calculation includes a number of factors, including the following:

  • The discount rate applied to future benefit payments
  • The estimated number of years that employees will continue to work
  • The rate at which employee wages will increase in the future
  • The rate of return on plan assets