2014/2015 Survey of Results and Assumptions for Actuarial Valuations of Defined Benefit Schemes in accordance with

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1 2014/2015 Survey of Results and Assumptions for Actuarial Valuations of Defined Benefit Schemes in accordance with Hong Kong Accounting Standard 19 Employee Benefits

2 Survey of Results and Assumptions for Actuarial Valuations of Defined Benefit Schemes in accordance with Hong Kong Accounting Standard 19 Employee Benefits 2014/2015 Contents Highlights 1 1. Introduction 2 2. Discount Rate 3 3. Salary Increases 6 4. Demographic Assumptions Impact of HKAS 19 Figures on Company Financial Statements 14 Appendices A. Summary of Survey Statistics 17 B. Background to HKAS C. Methodology Employed to Set Financial Assumptions 20 D. HKAS 19 Terminology 21 E. About Towers Watson 22

3 Highlights discount rate has decreased The median discount rate has decreased by 0.4% from 2.10% p.a. in 2013/2014 to 1.70% p.a. in 2014/2015, reflecting a drop in bond yields. actual salary increases over the year was 5.0% while long term salary growth rate remains unchanged. The median salary increase over the past year was 5.0%, compared to 4.7% the previous year. On the other hand, the median assumption for long term salary increases has remained unchanged at 4% p.a. This long term rate has been maintained for many years. Net discount rate over long-term salary growth rate has decreased The key factor for determining the liabilities is the net discount rate over rate of salary increase. The median net discount rate has decreased from -1.90% p.a. in 2013/2014 to -2.40% p.a. in 2014/2015, leading to higher liabilities in general by around 3-5%. Most schemes adopted an expected retirement age of 60 and age-related withdrawal rates Majority (81%) of schemes adopted an expected retirement age of 60 and most (72%) of the surveyed schemes adopted an age-based withdrawal rates. This is broadly consistent with previous years. Annual Expense to be booked to Profit or Loss has decreased The Annual P&L Expense has decreased from 17.5% of salary in 2013/14 to 14.7% of salary this year. It is mainly due to the higher discount rate used in 2013/2014 compared to the previous year. towerswatson.com 1

4 1. Introduction Towers Watson has been surveying the financial parameters used by employers in complying with the requirements of Hong Kong Accounting Standard 19 Employee Benefits (HKAS 19) since its introduction on 1 January This report covers the following areas in the context of HKAS 19: Companies selection of financial assumptions; Companies selection of demographic assumptions; and Impact of HKAS 19 to Profit or Loss Account and Balance Sheet. This survey focuses on defined benefit retirement schemes which are established under the Occupational Retirement Schemes Ordinance ( ORSO ), the legislation governing the operation of voluntary retirement schemes in Hong Kong. It covers companies with accounting years ended within the survey period of 1 July 2014 and 30 June defined benefit schemes with around 45,000 members and a total scheme asset value of HK$44 billion are included in the survey. The survey covers about 50% of ORSO registered defined benefit schemes (as at 30 June 2015) in Hong Kong. A summary of the surveyed schemes statistics is set out in Appendix A. Most surveyed companies (about 75%) have financial years ending on 31 December, with the remainder typically having year-ends of either 31 March or 30 June. Given this, the survey results in this report primarily reflect data as at 31 December Measurement of HKAS 19 liabilities Hong Kong defined benefit schemes typically provide lump sum benefits payable on retirement, death or earlier termination of employment. HKAS 19 requires that the costs of providing such benefits are recognized on a regular basis as and when the benefits are accrued over the employees active service, even though the benefits will only be paid sometime in the future. In determining the annual cost of providing such benefits, actuarial assumptions are used to calculate the present value of such benefits to reflect the time value of money and the probability of payment. HKAS 19 requires the actuarial assumptions to be: best estimates; unbiased and mutually compatible; and based on market expectations at the balance sheet date. The assumptions adopted are ultimately the responsibility of the employer. For most of the surveyed schemes, the key financial assumptions are the discount rate and the long term salary increase rate; while key demographic assumptions are the expected retirement age, withdrawal rates, mortality rates and disability rates. These are reviewed in the following sections. Appendices B to D of this report set out the following references: Background of HKAS19 Methodology employed to set financial assumptions HKAS 19 terminology 2 HKAS 19 Accounting Survey Report 2014/2015

5 2. Discount Rate The median discount rate has reduced by 0.4% Figure 1 shows the discount rates which were adopted by the surveyed companies, compared to the yields of Hong Kong Exchange Fund Notes ( EFN ) as at 31 December Figure 1: Discount Rates versus EFN Yields 4.00% 3.50% 3.00% 2.50% Discount Rate % p.a. 2.00% 1.50% 1.00% 0.50% Discount Rate EFN Yields (Dec 2014) 0.00% Duration (years) The dots represent the discount rates that the surveyed companies have adopted, reflecting also the durations of the scheme liabilities. The red line denotes the actual EFN yield curve as at 31 December The lines extending beyond the duration of 13 years represent yields from the extrapolated the derived yield curve. The majority of surveyed companies have adopted discount rates which are within 0.1% of the EFN yields at their respective financial year-end dates. Some dots are slightly further away from the red line since the valuation date is not as of 31 December Isolated dots far away from the derived yield curves are outliers, representing companies setting discount rates using methods which are not directly referencing the relevant EFN yield. towerswatson.com 3

6 Figure 2 illustrates the distribution of discount rates adopted and the yields of 10-year EFNs for the last 5 years. Figure 2: Distribution of Discount Rates 6% 5% 4% % p.a. 3% 2.9% 2% 1% 1.5% 0.7% 2.1% 1.7% 0% 2010/ / / / /15 1st Quartile 3rd Quartile 2nd Quartile 4th Quartile Yield of 10-Year EFN as at 31 December The median discount rate used by companies in 2014/2015 was 1.70% p.a. compared to 2.10% p.a. for 2013/2014. This decrease is consistent with the decrease in EFN yields, coupled with a reduction of 0.6 years in the average duration across the surveyed schemes (see more details on the next page). In isolation, this change would have increased companies HKAS 19 liabilities by around 3-5% and hence resulted in an actuarial loss on liabilities. 4 HKAS 19 Accounting Survey Report 2014/2015

7 As most defined benefit schemes in Hong Kong are closed to new members, the average age of scheme members increases over time. This will lead to a reduction in the duration of liabilities. Figure 3 illustrates the distribution of duration of liabilities for the past two years. Over the past year, the average duration of schemes decreased from 8.5 years to 7.9 years. Figure 3: Distribution of DBO Durations / /2015 Number of Schemes < 2 2 to to to to to to 13.9 >= 14 Years towerswatson.com 5

8 3. Salary Increases The median long term salary assumption stays at 4% per annum. The distribution of the long-term rates of salary increases adopted by the surveyed companies is illustrated in Figure 4. Figure 4: Distribution of the long-term Rates of Salary Increases Nominal Salary Increase Rate (% p.a.) 8% 7% 6% 5% 4% 3% 2% 1% 0% 4.0% 4.0% 4.0% 4.0% 2010/ / / / /15 4.0% 4th Quartile 3rd Quartile 2nd Quartile 1st Quartile The median long term expectation of salary increases has remained unchanged at 4.0% p.a. in the past few years. The long term salary increase assumption, unlike the discount rate, is not expected to change materially from one measurement date to the next. 6 HKAS 19 Accounting Survey Report 2014/2015

9 Net discount rate over long-term rates of salary increases Although the individual financial assumptions are important, for the purposes of determining the liabilities of defined benefit retirement schemes, the net discount rate over salary increase assumption is more important than the individual rates in isolation. The higher the net discount rate, the lower the calculated liabilities, and vice versa. Figure 8: Net discount rate over salary increase assumption 6% 16.0 % 4% 14.0 % 2% 12.0 % % p.a. 0% -2% -4% -1.1% -2.5% -3.1% -1.9% -2.4% 10.0 % 8.0% 6.0% -6% 2010/ / / / /15 4.0% 4th Quartile 3rd Quartile 2nd Quartile 1st Quartile Figure 8 shows the distribution of the net discount rate of the surveyed companies. The net discount rate has decreased from -1.90% p.a. in 2013/2014 to -2.40% p.a. in 2014/2015, mostly due to the increased EFN yields over the year. In isolation, this has increased this year s calculated liabilities compared to last year. The reduction of the discount rate increased the total liability. For a typical scheme with a duration of 10 years, the increase of total liability, based on a reduction of the discount rate of 0.4%, is about 4%. towerswatson.com 7

10 Actual salary increases The distribution of actual salary increases over the past year for the surveyed companies are shown in Figure 5. The median salary increases in 2013/2014 was 4.7% and the median salary increases in 2014/2015 was 5.0%. Figure 5: Distribution of Actual Salary Increase in 2014/ Number of Schemes < 0% 0% to 1.9% 2% to 3.9% 4% to 5.9% 6% to 7.9% 8% to 9.9% >= 10% Additionally, we have compared past-year salary increases against short-term salary increase assumptions set at the start of the year over the past three years. Our results show that short term salary increase assumptions tend to underestimate actual experience. The results are shown in Figure 6. 8 HKAS 19 Accounting Survey Report 2014/2015

11 Figure 6: Distribution of Actual Salary Increases Over Short-Term Salary Increase Assumptions 12% 22.0 % 10% 20.0 % 8% 18.0 % 6% 16.0 % % p.a. 4% 2% 0% 0.6% 0.5% 0.6% 14.0 % 12.0 % 10.0 % -2% 8.0% -4% 6.0% -6% 2012/ / /15 4.0% 4th Quartile 3rd Quartile 2nd Quartile 1st Quartile We have also investigated recent actual salary increases against the assumed salary increases over a one year, three year and five year period. The results shown below in Figure 7 represents the difference between the salary increase experiences against the assumed rate of salary increases. The statistics shown in Figure 7 capture only the companies where we have sufficient historical salary increase data (about 80% over the past year). Figure 7: Actual salary increases over salary increase assumption 22.0 % 10% 20.0 % 18.0 % 6% 16.0 % 14.0 % % p.a. 2% -2% 0.5% 0.5% 0.3% 12.0 % 10.0 % 8.0% 6.0% -6% 4.0% 2.0% -10% 1-year average 3-year average 5-year average 0.0% 4th Quartile 3rd Quartile 2nd Quartile 1st Quartile Figure 7 shows that although actual salary increases varied significantly in year 2014/2015, the deviation for majority of schemes is minor (that is, 2 nd and 3 rd quartile are narrow). It also shows that towerswatson.com 9

12 slightly more than 50% of companies experience higher salary increases than the adopted long-term salary increase assumption. Over the longer time, the variance decreases meaning that the actual increases are more closely matching the expected increase rate. In Figure 7, we have used data for 78 schemes for the past-year increase, 70 schemes for the 3-year average and 57 schemes for the 5-year average. 10 HKAS 19 Accounting Survey Report 2014/2015

13 4. Demographic Assumptions Key demographic assumptions are the expected retirement age, withdrawal rates, mortality rates and disability rates. Unlike financial assumptions, demographic assumptions are expected to be reasonably stable from one measurement date to the next, unless there is a large change in the membership profile. In addition, the setting of such assumptions are related to membership experience, rather than general market or financial conditions. Expected Retirement Age The expected retirement age reflects the normal retirement age of the scheme. Figure 9 shows the distribution of expected retirement age of the surveyed schemes. This is broadly consistent with prior years. Of the majority of the schemes expected retirement age is 60. Figure 9: Distribution of Expected Retirement Age Age 60 81% Age 65 6% Others 2% Age 55 11% With aging population and the improving health of employees at older ages, some employers are considering a change of the normal retirement age from age 60 to age 65. The Hong Kong Government has taken a lead to change the normal retirement age of civil servants from age 60 to age 65 for new recruits starting from The above statistics may change in the next few years. towerswatson.com 11

14 Withdrawal Rates This refers to members voluntary resignation rates prior to retirement. These are usually based on years of service or age of the members. Figure 10 shows the proportion of age related or service related rates of the surveyed schemes. The majority of the schemes withdrawal rates vary by members age. Figure 10: Distribution of Withdrawal Rates Service related 12% Nil 14% Others 2% Age related 72% Withdrawal rates usually decrease by age and years of service. Table 1 shows the quartile withdrawal rates for the selected ages of those schemes which adopted agerelated withdrawal rates. Table 1: Withdrawal Rates for selected ages First quartile withdrawal rates (p.a.) withdrawal rates (p.a.) Third quartile withdrawal rates (p.a.) Age % 7.0% 9.0% Age % 2.0% 4.0% Age % 0.0% 0.4% The three quartile withdrawal rates all display decrease trend from age 35 to age 55. It is reasonable to assume that a member approaching normal retirement age is more likely to remain with their employer until retirement. The average age of the surveyed schemes members is 47, which corresponds to a median withdrawal rate of around 2% per annum. It is much lower than the average withdrawal rates of all employees mainly because many ORSO schemes are closed to new entrants so their membership profiles are more mature and stable than the industry average. 12 HKAS 19 Accounting Survey Report 2014/2015

15 Mortality Rates and Disability Rates 90% of the surveyed schemes mortality assumptions follow Hong Kong Life Tables 2011, which is the most recently published tables by the Census and Statistics Department based on a full population census. 67% of the surveyed schemes assume 0% disability rates, and the remaining schemes mostly use age-related tables. These two assumptions are relatively immaterial to the calculation of the liabilities in respect of lumpsum retirement schemes. Also, it is often not practical to derive scheme specific assumptions due to insufficient membership size. Therefore, it is common to use standard tables for the mortality assume and assume no disability decrements. towerswatson.com 13

16 5. Impact of HKAS 19 Figures on Company Financial Statements In this section, we look at the following HKAS 19 statistics: Annual P&L Expense as a percentage of companies annual scheme salaries; Annual P&L Expense compared to the actual contributions paid by companies; and Net Asset / Net Liability (i.e. scheme surplus or deficit) as a multiple of monthly scheme salary. Annual P&L Expense as a Percentage of Annual Scheme Salaries Figure 11 illustrates the Annual Expense of the surveyed schemes as a percentage of their respective employees scheme salaries for fiscal years 2013/2014 and 2014/2015, as well as the preliminary expense for 2015/2016. Figure 11: Annual Expense as a Percentage of Annual Scheme Salaries 45% 40% 35% Percentage of Schemes 30% 25% 20% 15% 10% 5% 0% Less than 0% 0% to 4% 5% to 9% 10% to 14% 15% to 19% 20% to 24% 25% to 29% 30% or More Expense as % of Scheme Salaries 2013/2014 Expense (Overall 17.5%) 2014/2015 Expense (Overall 14.7%) 2015/2016 Preliminary Expense (Overall 16.0%) The median Annual P&L Expense as a percentage of the employees scheme salaries in 2014/2015 (14.7%) is lower than that in 2013/14 (17.5%). This is mainly due to the increase in discount rate in 2013/2014 compared to 2012/2013. For the same reason, the preliminary Annual P&L Expense for the next year is expected to increase mainly due to the decrease in discount rate. 14 HKAS 19 Accounting Survey Report 2014/2015

17 Annual Expense compared to contributions paid by companies Figure 12 illustrates the actual cash contributions paid as a percentage of the corresponding Annual Expense during 2013/2014 and 2014/2015 by the surveyed companies. Figure 12: Employer Contributions vs. P&L charges 30% 2013/ / % % of Schemes 10% 0% 0% >0%,<20% 20%,<40% 40%,<60% 60%,<80% 80%, 100% >100% Contributions as a % of Annual Expense In Hong Kong, companies fund their retirement schemes based on actuarial recommendations following periodic funding valuations carried out under the provisions of ORSO. For more than 90% of the surveyed companies, in 2013/14 and 2014/15, annual cash contributions are lower than the respective year s Annual Expense. This means that the discount rates used for the ORSO purposes are higher than those adopted for HKAS 19, which in isolation leads to lower assessed liabilities. The key reason is the low discount rate adopted for the HKAS 19 valuation. Furthermore, 30% of surveyed companies made no cash contributions in the past year. These companies have assets sufficiently high enough to exempt them from contributing to their ORSO scheme. This is broadly consistent with the prior year. (Note: Some funds have been excluded from the statics in Figure 12 as they have reported an annual expense of zero.) towerswatson.com 15

18 Net Asset (Surplus) / Net Liability (Deficit) (i.e. scheme surplus or deficit) as multiple of monthly scheme salary The Net Asset or Net Liability reflects the market value of Scheme assets minus total scheme liability. Figure 13 shows the distribution of Net Liability (positive figure) or Net Asset (negative figure) disclosed in the companies Balance Sheets expressed as a multiple of employees monthly scheme salaries. At 2014/2015 year-end, more than 50% of the surveyed companies had a Net Liability on their balance sheets instead of a Net Asset. The median multiple changed from a Net Liability of 0.5 in 2013/2014 to a Net Liability of 1.1 in 2014/2015. The main factors affecting the Net Asset / Liability position are: Decrease in EFN yields leading to a lower discount rate and hence higher DBO. This has had a negative effect on the Net Asset figures; and Overall asset returns over the last year have been higher than the discount rate this had a positive effect on the Net Asset figures. Figure 13: Distribution of Net Liability (Asset) as a Multiple of Monthly Salaries Asset Multiple of Monthly Salaries Liability 10 0 (10) (20) (30) (40) (2.2) (1.4) (1.1) (50) 2010/ / / / /15 4th Quartile 3rd Quartile 2nd Quartile 1st Quartile HKAS 19 Accounting Survey Report 2014/2015

19 Appendix A: Summary of Survey Statistics A summary of the survey statistics is set out in Table 2: Table 2: Survey Statistics Covered Period 2010/ / / / / 2015 Number of Schemes Number of Employers Number of Members 55,000 54,000 51,000 49,000 45,000 Total Monthly Scheme Salaries (HK$ million) Average Monthly Scheme Salary ($HK) Total Scheme Assets (HK$ billion) Average Scheme Assets per Employer (HK$ million) Average Scheme Assets per Scheme (HK$ million) 1,047 1,087 1,084 1,079 1,086 19,000 20,300 21,400 22,100 23, Most companies (71%) have a financial accounting year-end of 31 December. The distribution of the measurement dates adopted is illustrated in Figure 14. Figure 14: Measurement Date Distribution 28-Feb 2% 31-Mar 14% 31-Dec 71% 30-Jun 8% 31-Aug 2% 30-Sep 1% 31-Oct 2% towerswatson.com 17

20 Figure 15 shows the distribution of schemes investing in different equities versus cash and bond allocations. Allocations to equities versus cash and bonds are rounded to the nearest 10%. Investments in other assets, such as in hedge funds, are grouped with cash and bonds. Overall, there is a high allocation of scheme assets invested in equities. The most common allocation is a 70% weighting to equities and a 30% weighting to cash and bonds. There is also a concentration of schemes investing only in cash and bonds. Figure 15: Distribution of Schemes in Different Equities versus Cash and Bond Asset Allocations 30% 25% % of surveyed schemes 20% 15% 10% 5% 0% 0/100 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100/0 Equities/Cash & Bonds allocation Figure 16 illustrates the distribution of asset classes as a percentage of total assets under management across all surveyed schemes. Figure 16: Allocation of Assets Across all Surveyed Schemes Bond 34.5% Cash 6.1% Others 1.0% Equity 58.4% 18 HKAS 19 Accounting Survey Report 2014/2015

21 Appendix B: Background to HKAS 19 HKAS 19 (previously known as SSAP 34) was issued by the Hong Kong Institute of Certified Public Accountants in December 2001 and became effective on 1 January HKAS 19 is essentially the same as the IAS 19 accounting standard issued by the International Accounting Standards Board and was adopted as applicable to Hong Kong companies by the Hong Kong Institute of Certified Public Accountants. In essence, HKAS 19 requires companies to account for the costs of providing employee benefits in their Profit or Loss Account and Balance Sheet, and prescribes the methods and assumptions to be used to obtain these costs. HKAS 19 classifies the benefits provided by companies to their employees into various categories, and prescribes the specific treatment to account for the cost of these separate categories of benefits. Like many other accounting standards that deal with employee benefits issued by other accounting bodies worldwide, HKAS 19 is designed to: provide greater consistency in the treatment of liabilities in respect of employee benefits and consequently to enable better comparability of benefit costs; and provide disclosures that improve reporting so that users of financial statements can have a better understanding of the commitment undertaken by the companies regarding employee benefits. Since its inception, some amendments have been made to the HKAS 19. The major changes include: A one-off option was introduced whereby actuarial gains and losses may be recognized immediately and fully on a company s balance sheet through Other Comprehensive Income ( OCI ), previously Statement of Recognized Income and Expenses ( SORIE ), rather than through the Profit or Loss Account. Companies had up to 31 December 2006 to decide whether to adopt the OCI option for recognizing actuarial gains and losses. For a group defined benefit scheme with a number of associated participating employers, HKAS 19 requires that the aggregate group HKAS 19 cost should be determined on a defined benefit basis and shared amongst the participating employers according to the group s agreed policy of sharing costs. If such policy does not exist, the individual participating employers HKAS 19 cost will be its actual cash contributions with the representative employer absorbing the differences between the group scheme s HKAS 19 cost and the employers aggregate cash contributions. Major amendments were made in 2011 (see Section 6 on page 13 for further details). The two most significant changes that have most impact to the schemes in Hong Kong are the requirement to recognize all actuarial gains and losses immediately in the year they arise in Other Comprehensive Income, and the removal of expected return on scheme assets from the calculation of Annual Expense. Such amendments have been effective since 1 January towerswatson.com 19

22 Appendix C: Methodology Employed to Set Financial Assumptions Discount Rate The discount rate is used to calculate the present value of benefit obligations at each financial year end, and the service cost and interest cost components of the Annual Expense for the following financial year. For example, the discount rate as at 31 December 2014 will be used to assess the present value of the benefit obligation as at that date, and the Annual Expense items for the financial year Currently, HKAS 19 stipulates that the discount rate is determined by reference to market yields of high quality corporate bonds at the balance sheet date, with the currency and term of the bonds being similar to the estimated term of the benefit obligations. In countries with no deep market in such bonds, the yields on government bonds should be used. Since Hong Kong only has limited issues of corporate bonds, companies have typically used the yields of Hong Kong Government s Exchange Fund Notes ( EFN ) as the reference benchmark to set the discount rate. In isolation, the discount rate has an inverse relationship with the HKAS 19 costs; the lower the discount rate, the higher the HKAS 19 liabilities and service costs, and vice versa. As the discount rate is set as at the balance sheet date (i.e. a snapshot in time), companies HKAS 19 costs can be subject to high degree of volatility, reflecting the yields on EFN which are, in turn, driven by fluctuations in the interest rate landscape. Salary Increases The salary increase assumption is used to project current salaries into the future to determine the amount of the salary related benefit payable at a future date. A higher salary increase assumption will lead to a higher expected amount of benefits to be paid, and consequently, a higher Defined Benefit Obligation and Annual Expense. Year-to-year salary growth may be a function of: productivity improvement; inflation; and merit or promotional increases. 20 HKAS 19 Accounting Survey Report 2014/2015

23 Appendix D: HKAS 19 Terminology Current Service Cost Increase in the present value of the Defined Benefit Obligation resulting from employee service in the current accounting period. Fair Value The amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm s length transaction. Net Defined Benefit Liability / (Asset) The deficit or surplus, adjusted for any effect of limiting a net defined benefit asset due to the asset ceiling. A Net Defined Benefit Liability arises if there is a deficit (i.e. the present value of the Defined Benefit Obligation is greater than the Fair Value of scheme assets) and vice versa. Net Interest on Net Defined Benefit Liability / (Asset) Change in the Net Defined Benefit Liability / (Asset) during the period, arising from the passage of time. Past Service Cost Change in the present value of the Defined Benefit Obligation for employee service in prior periods, resulting from a scheme amendment (the introduction of, or changes to, scheme benefits) or a curtailment (a significant reduction by the entity in the number of employees covered by the scheme). Past Service Cost can be positive or negative. Present Value of Defined Benefit Obligation (DBO) Present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods. As required by HKAS 19, it is calculated using the Projected Unit Credit method, and assumptions that are individual best estimates as well as mutually compatible. Service Cost Service cost comprises of the Current Service Cost, the Past Service Cost and any gain or loss on settlement. towerswatson.com 21

24 Appendix E: About Towers Watson Towers Watson Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 16,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Our focus is on giving clients clear advice which enables them to make the right decisions and take the right actions. And our approach is grounded in perspective the kind that comes from our deep experience working on a wide range of issues. But more important, our perspective begins at eye level with a clear understanding of the clients organization, the way the clients work, their goals and challenges. By connecting the big picture and, your picture, we help to achieve real-world results. Towers Watson in Asia Pacific In the Asia-Pacific Region, Towers Watson operates 23 offices in 13 markets: Australia, China, Taiwan, Hong Kong, Singapore, South Korea, Japan, Malaysia, Philippines, India, Indonesia, Thailand and Vietnam with close to 2,300 associates. Towers Watson in Hong Kong Our Hong Kong office, the first and largest in Asia Pacific, was established 40 years ago. We were also the first major professional services company to open offices in China. Today, Towers Watson Hong Kong has about 200 employees and offers a full spectrum of consulting services on Human Resources and Financial and Risk matters. Benefits in Hong Kong Towers Watson s Benefits business in Hong Kong provides retirement scheme consulting advice, actuarial services, insured benefits advice and administration services, and accounts for more than 50 staff. Towers Watson assists a variety of clients with sizes ranging from less than 10 employees to over 150,000 employees. In Hong Kong, Towers Watson has been established for over 40 years and is by far the largest actuarial consulting practice in the Special Administrative Region. Towers Watson has worked with many of Hong Kong s leading employers, both locally listed and multinational companies, in all aspects of retirement schemes. As a result, we have unparalleled knowledge of current practice in employee benefits and retirement schemes, new trends and legislative requirements. HKAS 19 Services Our integrated range of services includes: Actuarial accounting valuations to help determine scheme expense and for purposes of meeting disclosure requirements for corporate reporting; Sensitivity assessment of adopting different assumption parameters, including impact to company Profit or Loss and Balance Sheet; Advice in relation to cash versus accounting issues; Application to other related benefits such as the Long Service Payment (LSP) benefit; and Training seminars for clients and auditors covering key concepts of HKAS 19, including updates on topical matters. 22 HKAS 19 Accounting Survey Report 2014/2015

25 For more information regarding this survey, please contact your Towers Watson consultant or: Terence Chiu Senior Analyst Benefits, Hong Kong (852) Elaine Hwang Director Benefits, Hong Kong (852) Copyright 2015 Towers Watson. All rights reserved. towerswatson.com towerswatson.com 23