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FRS17 and the Sterling Double A Corporate Yield Curve

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  • Frank S. Skinner
  • Michalis Ioannides

Abstract

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.

Suggested Citation

  • Frank S. Skinner & Michalis Ioannides, 2005. "FRS17 and the Sterling Double A Corporate Yield Curve," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5‐6), pages 1141-1169, June.
    • Handle: RePEc:bla:jbfnac:v:32:y:2005:i:5-6:p:1141-1169
    DOI: 10.1111/j.0306-686X.2005.00625.x
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