IAS 19 — Post vs. Pre- tax discount rate

Date recorded:


In February 2013, the IFRS Interpretations Committee  (‘the Committee’) considered a request to clarify whether, in accordance with IAS 19 (2011), the discount rate used to calculate a defined benefit liability should be pre- or post-tax. The specific tax regime outlined in the submission specified that: (a) the entity receives a tax deduction for contributions made to the plan; (b) the plan pays tax on contributions received and on investment income earned; but (c) the plan does not receive a tax deduction for benefits paid.

At the March meeting, Committee members expressed unanimous support that the discount rate should be pre-tax. Committee members noted that IAS 19 (2011) is clear that taxes relating to contributions and benefits should be taken into account in determining the ultimate cost of providing benefits (in accordance with IAS 19.76(b)(iv)). They also noted that in accordance with paragraph 130 of IAS 19 (2011), the return on plan assets includes any tax payable by the plan itself other than tax included in the measurement of the present value of the defined benefit obligation. In addition, paragraph BC130 of IAS 19 (2011) the measurement of the obligations should be independent of the measure of any plan assets actually held by the plan. Therefore, they believed that IAS 19 (2011) was clear that the discount rate used to calculate a defined benefit liability should be pre-tax.

During the July meeting the Committee finalised its decision not to add this issue to its agenda. The proposed wording of the final agenda decision proposed by staff was agreed. There was no further discussion on this topic.

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