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Hlustration 4 AJ Ltd is engaged in the business of trading of chemicals having a net worth of 150 crores. The company's profitability is good and hence the company has introduced various benefits for its employees to keep them motivated and to ensure that they stay with the organization. The company is an associate of RJ Ltd which is listed on Bombay Stock Exchange in India. The company initially did not have any HR function but over the last 2 years, the management set up that function and now HR department takes care of all the benefits related to the employees and how they can be structured in a manner beneficial to both the employees and the objectives of the company. One of the employee benefits involves a lump sum payment to employee on termination of service and that is equal to 1 per cent of final salary for each year of service. Consider the salary in year 1 is * 10,000 and is assumed to increase at 7 per cent (compound) each year. Taking a discount rate at 10 per cent per year, you are required to show (a) benefits attributed (year on year) and (b) the obligation in respect of this benefit (year on year) For and employee who is expected to leave at the end of year 5 Following assumptions may be taken to solve this: There are no changes in actuarial assumptions. No additional adjustments are needed to reflect the probability that the employee may leave the entity at an earlier or later date

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