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Commonwealth Bond Yields 30 June 2020

Discounting employee benefits in accordance with AASB119

Where to find the discount rates

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.

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

Statistical Tables | RBA

Once on the RBA’s website, the relevant yields can be obtained by opening the spreadsheet titled ‘Indicative Mid Rates of Australian Government Securities – F16’. The information is contained on the ‘Data’ worksheet. At the top of this worksheet there is a ‘description’ row. This row records the details of the maturity dates and coupon rates of each bond. The yields at 30 June for each bond can then be obtained from the relevant row in the table below.

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.

Contact

Any further enquiries on this matter should be addressed to:
TropicalWorkshop@dlgrma.qld.gov.au

Last updated: Thursday, Jul 29, 2021