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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Anand Steels Ltd is valuing its post-employment defined benefit obligation, which is denominated in Indian rupees, at the reporting date. The finance team debates the basis for the discount rate. Which basis is required by Ind AS 19 for rupee-denominated obligations?

The discount rate is based on market yields on government bonds. Ind AS 19 departs from IAS 19, which prefers high quality corporate bonds where a deep market exists, and requires the government bond reference for rupee-denominated post-employment benefit obligations.

  1. AMarket yields on high quality corporate bonds, since India has a deep corporate bond market
  2. BThe entity's own weighted average cost of capital
  3. CThe expected return on plan assets
  4. DMarket yields on government bonds at the end of the reporting periodCorrect

Explanation

Ind AS 19 differs from IAS 19 here: the rate to discount post-employment benefit obligations is determined by reference to market yields on government bonds. IAS 19 uses government bonds only where there is no deep market in high quality corporate bonds. The corporate bond option reflects IAS 19, not Ind AS 19.

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