To assist companies in determining the discount rate, Mercer delivers monthly information on the discount rates for IFRS, US-GAAP and HGB (German Commercial Code) valuations of pension obligations. Furthermore, Mercer reports weekly on the development of the discount rates for IFRS and US-GAAP valuations during November and December of each year.
Discount rate for IFRS/US-GAAP valuations
To determine the discount rate recommendation Mercer uses its own approach, the ‘Mercer Yield Curve Approach’ (MYC). The MYC is being used for setting discount rates for valuations made for USA, UK, Canada, Eurozone and some other countries. According to this approach, Mercer creates a ‘Spot Rate Yield Curve’ based on bonds from the Thomson Reuter’s Datastream indexes (until 31.5.2015 from Bloomberg indexes) in the Euro area. Since the discount rate in accordance with IAS 19.78 is defined by the ‘time value of money’, which by definition does not incorporate any greater risk of default, Mercer consequently uses only those bonds, which have no interest rate-distorting options, like e.g. it would be the case with
For the valuations according to international accounting standards (IFRS/US-GAAP/FRS), the discount rate should be determined according to the maturity of the liability based on "
Due to the uncertainties in the financial markets, the spread between the yield on (
Further information on the present uncertainties in the Eurozone (ECB‘s quantitative easing program, Brexit und Greek crisis) and the corresponding impact on yields of corporate bonds can be found here.
Our recommendation is based on
Basis: Until 31.05.2015 Bloomberg indexes, since 30.06.2015 Thomson Reuters Datastream indexes. Discount rates Mercer Yield Curve 2006–2014 rounded to 10 basis points. Smaller adjustments in the calculation as of 30.06.2015 and 30.11.2016 (description here).
The effects of changes in discount rates lead to so-called actuarial
The following interest rates can be derived from the MYC for different durations through an interpolation (as
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