G-Sec Interest Rates Yield Chart (India) Review: 31st March 2023
G-Sec Interest Rates Yield Chart (India) Review: 31st March 2023
Actuarial Valuations: Gratuity, Leave & Pensions
AS-15 | Ind AS 19 | IAS 19 | US GAAP
Review date: 1st April, 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.
Key Observations: 12 monthly reviews
- There is a sharp upsurge in the short term interest rates primarily led by ongoing rate hike cycle by US impact the monetary policies world over.
- A modest surge of 25 to 30 basis points is seen in long term yields
Entities could expect liabilities to reduce by 4.5% because of interest rate increase (assuming a 10-year term of obligation and a 40 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.
For any query, observation, or more information please reach us personally at
Mr. jenil Shah,
Consulting Agency
jenil@kapadiaglobal.com
+919867075522
Mr. Anil Sevak,
HEAD: Employee Benefits
anil@kapadiaglobal.com
+918454066628
