Actuarial interest rate calculation to evaluate obligations according to US-GAAP and IFRS
To support companies in determining the actuarial interest rate we will inform you regularly here about the actuarial interest rate that is applied according to US-GAAP/IFRS.
To assess pension obligations according to these international accounting regulations, the interest rate must be determined on the basis of “high quality corporate bonds” in conjunction with the run duration of the obligation.
Our method for determining the actuarial interest rate is based on the yield curve of German government bonds that is issued by the Deutsche Bundesbank (German Federal Reserve Bank) (no-risk interest rate).
Based on the duration, so-called “spreads” are calculated that are derived from the yields issued by iBoxx for AA corporate bonds in the Euro realm. These spreads are added to the respective risk-free interest rate.
Since the financial market crisis of the year 2008, the yield level for financial bonds has increased significantly compared to bonds in other sectors. For this reason, financial instruments are only weighted at 20% in our method.