A ‘provision’ is defined as a liability of uncertain timing or amount. Where settlement is expected to be deferred for some time, various standards require the liability to be measured at present value. For example, AASB 119 Employee Benefits, AASB 137 Provisions, Contingent Liabilities and Contingent Assets and AASB 1023 General Insurance Contracts require certain provisions for superannuation, long-service leave, workers’ compensation, insurance claims, etc, to be measured at present value.
This TPG specifies the source of the discount rate, inflation rate and wage growth to ensure consistency across NSW Government agencies for determining the present value of provisions. Agencies should note that the factors may need to be extrapolated, interpolated or modified if necessary to reflect entity-specific risks or circumstances.
This TPG withdraws and replaces NSWTC 11/17 Determining the present value of a provision without substantively changing its content. There is a change in the source of the discount rate for not-for profit agencies due the Reserve Bank of Australia (RBA) no longer publishing the table previously referred to in TC 11-17 Determining the present value of a provision.
