Document ID: chunk:federal_register_of_legislation:F2024L00075:reg:38:p41
Version: federal_register_of_legislation:F2024L00075
Segment Type: reg
Provision Reference: reg 38 (pt 41/76)
Character Range: 148518–151615

which incorporates the IASB's ED/2013/7 Insurance Contracts.[12]
BC115        Due to the relative weight of argument, the AASB concluded against proposing that defined benefit members' accrued benefits be measured at fair value or current exit value.
BC116        In relation to paragraph BC113(c), the AASB noted that, while the requirements in AAS 25 for measuring defined benefit members' accrued benefits are conceptually consistent with the requirements in AASB 119 for measuring defined benefit member liabilities, AAS 25 is arguably more permissive.  For example, AAS 25:
(a)                   does not specify the actuarial valuation method required to measure defined benefit members' accrued benefits;
(b)                   provides little or no guidance in relation to assumptions used in measuring defined benefit member liabilities; and
(c)                   requires a superannuation plan to measure its defined benefit members' accrued benefits as frequently as required for statutory purposes, which might not be annually.
BC117        The AASB also noted AAS 25 required a superannuation plan to discount defined benefit members' accrued benefits at the rate of return the plan anticipates it could achieve if, at the measurement date, sufficient funds were available to meet members' accrued benefits as they fall due.  The AASB considered the merits of this approach and rejected it because the discount rate might be affected by the actual types of assets held by a plan and AAS 25 does not establish a sufficient link between that rate and the nature or amounts of the plan's liabilities.  The AASB was particularly concerned that, under AAS 25, a plan could potentially recognise a smaller amount for its defined benefit member liabilities than it would otherwise by holding riskier assets with potentially higher expected rates of return.
BC118        In relation to paragraph BC113(d), the AASB decided that, to achieve greater consistency across superannuation entities, and to facilitate consistency with the measurement of defined benefit and other liabilities by other entities, the approach in AASB 119 should be proposed in ED 179, on the following basis:
(a)                   use actuarial techniques and assumptions to make a reliable estimate of expected future cash flows;
(b)                   determine the present value of liabilities using the projected unit credit method;
(c)                   be permitted to apply estimates, averages and computational shortcuts for determining its liabilities; and
(d)                   measure liabilities at the end of each reporting period to help ensure users have useful information on a timely basis.
BC119        However, the AASB also decided some of the AASB 119 measurement requirements in respect of defined benefit member liabilities may need to be modified for application in a superannuation entity context.  In particular, the AASB decided ED 179 should propose that:
(a)                   expected administration costs not be included because, although they may be regarded as a component of the ultimate