The International Accounting Standards Board (IASB) has decided to scrap plans to replace government bond rates as the basis for determining discount rates in respect of IAS 19 employee benefits.
According to Board papers, the IASB received feedback that the plan for a hypothetical corporate bond spread was too complicated, and would probably cost much more than previously thought. The Board was thus advised against making the changes.
IAS 19 currently requires companies to use the value of high quality corporate bonds to calculate the rate used to discount employee benefits, although in countries which do not have a liquid corporate bond market, the yield on government bonds must be used instead. Thus the proposed change was aimed at create an even playing field between differing national schemes.
The IASB's feedback suggested that international organizations and those in Europe, North America supported the amendment, but those in the Asia-Pacific region and emerging markets did not. The level of support appeared to depend on the proximity of the respondent to a deep corporate bond market.
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