The questions you asked, answered.

No. If your external auditor needs you to comply with Philippine Accounting Standard 19 (PAS 19), you need the accounting valuation to complete your audited statements, whatever your headcount.

The only exemption is in the retirement pay law itself. Republic Act 7641 exempts retail, service and agricultural establishments with 10 or fewer employees. A very small shop may be exempt, but most companies are covered.

It depends on your size under the SEC's four tiers. Large or publicly accountable entities, with total assets above ₱350 million or liabilities above ₱250 million, report under full PFRS, which means PAS 19. Medium entities, with assets of ₱100 million to ₱350 million or liabilities of ₱100 million to ₱250 million, use PFRS for SMEs, Section 28. Both of these require an actuarial valuation.

Small entities, above ₱3 million up to ₱100 million, use the PFRS for Small Entities, Section 22, which needs a straightforward computation from your employee data instead of a full valuation. Micro entities, ₱3 million and below, use the income tax basis or the PFRS for Small Entities. Every tier still owes the RA 7641 minimum. The framework only changes how the liability is measured and disclosed. Confirm your tier with your auditor.

Under RA 7641, one half month salary is 22.5 days of pay, not 15: 15 days of salary, plus 5 days of service incentive leave, plus one twelfth of the 13th month pay, which is 2.5 days. It is paid for every year of service to an employee who retires at 60 to 65 with at least 5 years of service.

As an example, an employee earning ₱50,000 a month who retires after 25 years would receive about ₱1.29 million. The daily rate depends on your working day schedule, so the exact figure moves a little from company to company. See our guide to RA 7641 retirement pay.

Yes. If the company has no retirement plan registered with the BIR, and the employee retires at 60 or older with at least 5 years of service, the benefit paid under RA 7641 is exempt from income tax.

Because the promise is earned every year an employee works, not on the day they retire. Under pay as you go, the cost hits profit or loss in spikes during retirement years, and the obligation never shows on the balance sheet. That is not compliant with PFRS, and it usually ends in audit adjustments or even a restatement.

Under PAS 19, cost is recognized as employees earn it, using the projected unit credit method. Each year of service earns one unit of the final benefit, valued in today's money. Early units are heavily discounted and late units are close to payment, which is why employees nearing retirement carry most of the expense while new hires cost very little.

Because of the RA 7641 floor. If an employee's account falls short of the RA 7641 minimum at retirement, the company has to top it up, and that guarantee is valued as a defined benefit. For example, a plan that contributes 5% of pay each month still has to be compared with the RA 7641 formula, and the company pays the difference.

Not if you report under full PAS 19. The standard requires projected salaries, discounting and the projected unit credit method, which is an actuarial valuation. A simple computation at current pay is what the PFRS for Small Entities allows, not PAS 19.

It follows your retirement policy. The minimum basis is basic salary, without allowances or non taxable items. If your policy says retirement pay is computed on basic plus allowances, send us that amount instead.

If you are still deciding which basis to use, a wider basis gives employees a bigger benefit and costs the company more. Most of our clients compute on basic salary.

If the contract ends on or before June 30, the employee is out of the valuation as of your reporting date. What your auditor will usually want instead is a benefit payable for that employee, recognized as part of the obligation still to be settled by the school, in place of an actuarial calculation.

Yes, as long as your auditor agrees. Interest rates usually do not move materially between October and December, so auditors generally accept an early valuation date using October or November rates, with headcount and salaries projected to year end.

With audit timelines this tight, an early start is the better choice. Get your auditor's buy in on the cutoff date first.

PAS 19 requires the discount rate to come from market yields on high quality corporate bonds at the reporting date, or government bond yields where that market is not deep. In the Philippines, the practice is to use the government bond yield curve at the valuation date, matched to when your benefits are expected to be paid. It is not a company input. Check the source, the date and the duration.

As shared in the session, the 10 year Philippine government bond yield was 7.99% as of October 7, 2026, the highest since October 2018 and up 1.68 points over 12 months. If yields hold, year end discount rates will be higher than last year, so most companies will see a lower defined benefit obligation and possibly a gain in other comprehensive income. For one 30 year old employee, a discount rate of 6.9% instead of 7.9% raises the obligation by 32%, while 8.9% lowers it by 24%. A whole workforce is less extreme: with a 12 year duration, one point moves the obligation by about 11%.

Salary increases work the other way: a higher assumption means a higher obligation. With headline inflation at 7.2% in September 2026, up from 6.1% in August, expect auditors to question a salary assumption left unchanged. They will compare it with your last 3 years of actual increases, next year's budget, any CBA and the inflation outlook.

They come from updating an assumption between valuations. If last year used a 10% turnover table and this year uses 8%, the difference appears as a change in demographic assumptions. If the discount rate moved from 6.4% to 7.9%, that change shows up in the line for economic assumptions.

Separately, an experience gain or loss compares what last year's assumptions expected with what your workforce actually did: pay increases, resignations, retirements that came earlier or later, and corrected data. A loss in the same direction every year means an assumption needs fixing, so the report stops surprising you.

Yes. The estimated expense recognized in profit or loss for the next year, Table 9 in our reports, is effectively your retirement expense for that year. It changes only if a special event happens during the year, such as a restructuring, a downsizing, or a change to your retirement program.

Under PAS 8 and PAS 1, the disclosure needs a comparative figure for the prior year, so the actuary values the obligation at two or three dates to show what it should have been last year. That way only the proper cost for this year goes to this year's results.

In practice your auditor will weigh materiality. Some will put everything in profit or loss this year if the amount is not material, and others will take the prior amount directly to retained earnings. Either way, the opening liability for all past service is recognized at once, so plan the conversation with management early, and agree the approach with your external auditor before the valuation is finalized.

The fund appears as plan assets at fair value, deducted from the defined benefit obligation. The result is the net defined benefit liability on your balance sheet. Without a fund, the whole obligation is your liability. In most companies the fund covers only part of the obligation, so what remains is still a liability. The closing fund balance in our report must agree with your trustee's fund statement.

Separation pay is a termination benefit, recognized on its own. Its effect on the retirement obligation, because employees left earlier than assumed, may show up as a settlement or curtailment. That is why plan changes, redundancy and early retirement programs, with board approvals and dates, belong in the data you send your actuary.

They are two separate reports with different jobs. The PAS 19 accounting valuation is what you need every year for your audited statements, whether or not you have a fund.

The funding valuation is a separate engagement. It tells you how much to contribute, and it is what the BIR requires to qualify your plan for tax exemption. You need it if you plan to contribute and want those contributions treated as a deductible business expense. If you are not contributing this year, you may not need it. A third number, the cost forecast, is used when deciding whether to set up or improve a plan and what it will cost over the years ahead.

Not as booked. Deductions follow different rules: the plan must be a BIR tax qualified plan, and the company must make actual contributions to the fund, not just reserve an expense. Normal cost is deductible in full in the year contributed, and past service contributions are spread over 10 years. Without a tax qualified plan, the deduction comes only when benefits are actually paid under RA 7641.

The timing gap usually creates a deferred tax asset on the net liability, which is worth reviewing with your tax advisor. See how a tax qualified plan under RA 4917 works.