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Discounting employee benefits in accordance with AASB119

Purpose

Commonwealth Bond yields are used by Local Governments when discounting employee benefits under Australian Accounting Standard AASB119 Employee Benefits.

The Reserve Bank of Australia (RBA) generally publishes yields on the 1st or 2nd business day after the applicable reporting period has ended. The Department when it republishes these yields doesn’t make any changes to RBA data, other than visual formatting.

Commonwealth Bond yields (as at the end of financial year) are published on the RBA’s website:

Indicative Mid Rates of Australian Government Securities – F16

Background

Section 177 of the Local Government Regulation 2012 and section 169 of the City of Brisbane Regulation 2012 requires:

A local government’s general purpose financial statement must be prepared in compliance with:

  • Australian Accounting Standards
  • Statements of Accounting Concepts;
  • Interpretations;
  • Framework for the Preparation and Presentation of Financial Statements.

The Local Government Regulation 2012 and City of Brisbane Regulation 2012 is available here.

Australian Accounting Standard AASB119 Employee Benefits requires:

AASB 119.Aus83.1 Notwithstanding paragraph 83, in respect of not-for-profit public sector entities, post-employment benefit obligations denominated in Australian currency shall be discounted using market yields on government bonds.

AASB 119.83 The rate used to discount post-employment benefit obligations (both funded and unfunded) shall be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. For currencies for which there is no deep market in such high-quality corporate bonds, the market yields (at the end of the reporting period) on government bonds denominated in that currency shall be used. The currency and term of the corporate bonds or government bonds shall be consistent with the currency and estimated term of the post-employment benefit obligations.

AASB119 also has the following features:

  • Prescribes general recognition and measurement criteria for employee benefits including wages and salaries, compensated absences, profit sharing and bonus plans, termination benefits and certain post-employment benefits.
  • Requires liabilities that arise in respect of short-term employee benefits (wages and salaries, leave entitlements and other employee benefits expected to be settled wholly within 12 months of the reporting date) to be measured at their nominal amounts.
  • Requires other long-term employee benefit liabilities (e.g. long service leave not expected to be settled wholly within 12 months after the reporting date) to be measured at present value.
  • Requires the market yields on government bonds to be used in determining the present value of other long-term employee benefit liabilities.
  • Requires disclosures to be made.

The current version of AASB 119 is available here.

Commonwealth Government Securities

The Reserve Bank of Australia’s published Indicative Mid Rates of Australian Government Securities, as at 30 June 2019 are as follows:

Description Maturity Coupon Yield
Treasury Bond 143 21-Oct-2019 2.75% 1.035
Treasury Bond 126 15-Apr-2020 4.50% 1.035
Treasury Bond 146 21-Nov-2020 1.75% 1.000
Treasury Bond 124 15-May-2021 5.75% 0.980
Treasury Bond 151 21-Dec-2021 2.00% 0.960
Treasury Bond 128 15-Jul-2022 5.75% 0.955
Treasury Bond 153 21-Nov-2022 2.25% 0.955
Treasury Bond 133 21-Apr-2023 5.50% 0.965
Treasury Bond 137 21-Apr-2024 2.75% 1.015
Treasury Bond 139 21-Apr-2025 3.25% 1.090
Treasury Bond 142 21-Apr-2026 4.25% 1.155
Treasury Bond 136 21-Apr-2027 4.75% 1.225
Treasury Bond 148 21-Nov-2027 2.75% 1.265
Treasury Bond 149 21-May-2028 2.25% 1.295
Treasury Bond 152 21-Nov-2028 2.75% 1.315
Treasury Bond 138 21-Apr-2029 3.25% 1.320
Treasury Bond 154 21-Nov-2029 2.75% 1.335
Treasury Bond 155 21-May-2030 2.50% 1.345
Treasury Bond 157 1-June-2031 1.50% 1.400
Treasury Bond 140 21-Apr-2033 4.50% 1.445
Treasury Bond 145 21-Jun-2035 2.75% 1.555
Treasury Bond 144 21-Apr-2037 3.75% 1.635
Treasury Bond 147 21-Jun-2039 3.25% 1.730
Treasury Bond 156 21-May-2041 2.75% 1.815
Treasury Bond 150 21-Mar-2047 3.00% 1.915

These rates are republished from the ‘Indicative Mid Rates of Australian Government Securities – F16’ table on the Reserve Bank of Australia’s website.

Contact

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