Document ID: chunk:federal_register_of_legislation:F2024L00075:reg:38:p42
Version: federal_register_of_legislation:F2024L00075
Segment Type: reg
Provision Reference: reg 38 (pt 42/76)
Character Range: 151345–154530

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 cost of an employer in meeting defined benefit member liabilities, they do not constitute a part of members' accrued benefits;
(b)                   if a superannuation plan's benefit formula prescribes that members accrue materially higher levels of benefits as they near retirement age, rather than attribute benefits to reporting periods on a straight-line basis, the superannuation entity would attribute member benefits to reporting periods on a basis appropriate to its circumstances;[13]
(c)                   consistent with the Framework, a superannuation entity would consider its assumptions to be unbiased if they are not imprudent or conservative (AASB 119 states actuarial assumptions are unbiased if they are neither imprudent nor excessively conservative); and
(d)                   expected future benefit payments be discounted for the time value of money using a risk-free discount rate based on current observable, objective rates that relate to the nature, structure and terms of the obligations for future benefit payments.  The AASB decided the AASB 119 requirement to determine discount rates by reference to market yields on high quality corporate bonds, or by applying yields on government bonds, is not relevant in a superannuation entity context.
BC120        Many respondents to ED 179 disagreed with the measurement proposals for defined benefit members' accrued benefits.  The reasons they cited include the following.
(a)                   Superannuation plans must currently calculate at least two, and potentially three, different liability measures:
(i)                     vested benefits on a quarterly basis for prudential reporting, and sometimes more frequently for trustee monitoring and reporting to employer-sponsors;
(ii)                   accrued benefits (discounted at the entity's estimated earnings rate) at least every three years for funding purposes and to meet prudential and legislative requirements; and
(iii)                 accrued benefits are potentially required to be calculated every year for the purpose of financial reporting by employer-sponsors under AASB 119.
Accordingly, requiring another liability measure would not be justified on cost-benefit grounds.
(b)                   The amount of defined benefit members' accrued benefits measured under ED 179 would be likely to differ from the amount for the same members measured under AASB 119, which could give rise to confusion among users.
(c)                   The amount of defined benefit members' accrued benefits measured under ED 179 would be likely to be greater than the amount for the same members measured for the actuarial review because the entity's estimated earnings rate will generally be used to discount future benefits for the purpose of the actuarial review and will generally be greater than a risk-free rate.  Accordingly, deficits would be more likely to be reported under