The International Accounting Standards Board (IASB) has published for public comment proposals to amend the discount rate for measuring employee benefits. The proposals respond to calls from stakeholders to address a problem that the global financial crisis has made increasingly significant.
Currently, the discount rate is chosen reference to market yields on high quality corporate bonds. However, when there is no deep market in corporate bonds, an entity is required to use market yields on government bonds instead. The global financial crisis has led to a widening of the spread between yields on corporate bonds and yields on government bonds. As a result, entities with similar employee benefit obligations may report them at very different amounts.
In view of the urgency of the issue and the limited scope of the proposals the IASB has set a shortened period for comments on the exposure draft. The IASB intends to permit entities to adopt the amendments that arise from this exposure draft in their December 2009 financial statements. The exposure draft is open for comment until 30 September 2009 and can be accessed via the following link.