Page 245 - Group Insurance and Retirement Benefit IC 83 E- Book

194 AS 15

81. In some cases, there may be no government bonds with a sufficiently
long maturity to match the estimated maturity of all the benefit payments.
In such cases, an enterprise uses current market rates of the appropriate
term to discount shorter term payments, and estimates the discount rate
for longer maturities by extrapolating current market rates along the yield
curve. The total present value of a defined benefit obligation is unlikely
to be particularly sensitive to the discount rate applied to the portion of
benefits that is payable beyond the final maturity of the available
government bonds.

82. Interest cost is computed by multiplying the discount rate as
determined at the start of the period by the present value of the defined
benefit obligation throughout that period, taking account of any material
changes in the obligation. The present value of the obligation will differ
from the liability recognised in the balance sheet because the liability is
recognised after deducting the fair value of any plan assets and because
some past service cost are not recognised immediately. [Illustration I
attached to the Standard illustrates the computation of interest cost, among
other things]
Actuarial Assumptions: Salaries, Benefits and Medical Costs

83. Post-employment benefit obligations should be measured on a basis
that reflects:

(a) estimated future salary increases;

(b) the benefits set out in the terms of the plan (or resulting from
any obligation that goes beyond those terms) at the balance sheet
date; and

(c) estimated future changes in the level of any state benefits that
affect the benefits payable under a defined benefit plan, if, and
only if, either:

(i) those changes were enacted before the balance sheet date;
or

(ii) past history, or other reliable evidence, indicates that those
state benefits will change in some predictable manner, for
example, in line with future changes in general price levels
or general salary levels.