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CA Final · Financial Reporting · Ind AS 19 Employee Benefits

Sunrise Textiles Ltd, an Indian company, has a defined benefit gratuity plan and is measuring its obligation at the reporting date. Under Ind AS 19 as notified in India, the discount rate for a post-employment benefit obligation denominated in Indian rupees is to be determined by reference to which of the following?

Under Ind AS 19 the discount rate for a rupee-denominated post-employment benefit obligation is based on market yields on government bonds at the reporting date. This differs from IAS 19, which prefers high quality corporate bonds where a deep market exists.

  1. AMarket yields on government bonds at the end of the reporting periodCorrect
  2. BMarket yields on high quality corporate bonds at the end of the reporting period
  3. CThe expected return on plan assets for the year
  4. DThe entity's incremental borrowing rate

Explanation

Ind AS 19 differs from IAS 19: for rupee obligations the discount rate is set by reference to market yields on government bonds. IAS 19 allows government bonds only where there is no deep market in high quality corporate bonds. Option B reflects the IAS 19 approach and is therefore wrong for Ind AS 19.

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