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FRS17 and the Sterling Double A Corporate Yield Curve
Author(s) -
Skinner Frank S.,
Ioannides Michalis
Publication year - 2005
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.0306-686x.2005.00625.x
Subject(s) - yield curve , yield (engineering) , economics , bond , pension plan , corporate bond , value (mathematics) , econometrics , selection (genetic algorithm) , pension , actuarial science , financial economics , finance , mathematics , statistics , computer science , materials science , artificial intelligence , metallurgy
We argue that the appropriate discount rate used to report defined benefit pension plan liabilities in the financial statements is a yield derived from an estimate of a double A corporate yield curve. We show that parsimonious yield curve techniques are easily applicable to the sterling double A corporate bond market. Moreover, we find that with a careful selection of the data an objective and reliable yield curve can be obtained. In all we find that using a yield from a sterling double A corporate yield curve to obtain the value of defined benefit pension plan liabilities is a feasible alternative to the current recommendations of FRS17 .