Projected unit credit method
IAS 19 uses this method to determine the present value of defined benefit obligations and related current and past service costs. Each period of service gives rise to an additional unit of benefit entitlement. The calculation estimates future benefits and discounts them, using assumptions including salary growth, mortality and discount rates as applicable.
Worked example
An employee is promised a retirement benefit based on final salary and years of service. An actuary projects the expected benefit and attributes it to service periods, then discounts the relevant amount to measure the obligation.
Common mistake
Describing any discounted cash-flow method as the IAS 19 actuarial method, or ignoring future salary assumptions relevant to the promised benefit.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Supporting | September 2026–June 2027 |