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CONTINUING INTEREST DECLINE TO WORSEN EFFECT OF THE AMENDED IAS 19

Reference interest rates continue to decline. As of September 29, 2012, the yield-to-maturity rate of government securities maturing in 15 years is 5.22% down by 0.37% (37 basis points) from 5.59% as of the end of last year.  Twenty-year maturing bonds' yield-to-maturity rate shed 0.40% (40 basis points) from 6.10% last year to 5.74%.

The decline in interest rate (discount rate) will worsen further the effect of the implementation of the Amended IAS 19 on the defined benefit obligation. It should be noted that depending on the maturity profile of the retirement benefit obligation, a 1% (100 basis points) decline in the discount rate could increase the Defined Benefit Obligation by 10% to 25%.

The Amended IAS 19 will be effective for reporting periods beginning on or after January 1, 2013.

 


See related articles:

AMENDED IAS 19 IMPACT QUANTIFIED

PREPARING FOR THE IMPACT OF THE AMENDED IAS 19

IAS 19 AMENDED