Accounting Standards such as IAS 19, require the use of the Projected Unit Credit (“PUC”) method.
The PUC method is a generally accepted actuarial method and is used to determine the value of benefits.
The projected unit credit method (sometimes known as the accrued benefit method pro-rated on service or as the benefit/years of service method) sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation
The PUC involves projecting – using salary escalation assumptions – each unit of benefit, up to future dates of leaving service, and then discounting those benefits back to the valuation date.