G-Sec Interest Rates Yield Chart (India) Actuarial Valuations: Defined Benefit Obligations 30th June 2023
Discount Rate for Actuarial Valuation of Employee Benefit
As per Para 83 of IND AS 19/IAS 19 (Revised) & Para 78 of AS 15 (Revised), the rate used to discount post-employment benefit obligations (both funded and unfunded) should be determined by reference to market yields at the balance sheet date on government bonds
Discount rate Comparison Table as at 31st March 2018
Key Observations: 3 monthly reviews
he short-term interest rates reduced in the range of 1o basis point to 30 basis points whereas long term interest rate reduced in the range of 5 basis point to 10 basis point due to various factor such as the RBI’s decision on the repo rate and declining inflation.
Entities could expect liabilities to increase by 2.5% because of interest rate increase (assuming a 10-year term of obligation and a 25 basis points increase in interest rates)
About Discount Rate & Use in Actuarial Valuations
The discount rate is a key assumption used in the Actuarial valuation of employee benefit liabilities. Actuarial valuation primarily finds the Present value of the liabilities (or benefits), that are expected to be paid in the future. For this purpose, it is vital to use the appropriate discount rate. The various accounting standards have prescribed, for the purpose of Employee Benefit valuations, the basis for choosing the discount rate. It states that an entity should use the government bond yields (or corporate bond yields, where applicable) for a term that is equivalent to the maturity term of the liabilities. Because of the aforesaid Guidance, the year-on-year movement in the discount rate is reflected in the year-on-year fluctuations in the Company’s Profit and Loss and Balance sheet.
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