The emergence of an accounting practice –An analysis of how the changes in interpretation and application of IAS 19 paragraph 83 resulted in a new accounting practice in Sweden

摘要

Background and discussion: IAS 19 paragraph 83 addresses the estimation of thediscount rate used for determination of the present value of defined benefit pension plans.Until 2010, the paragraph was consistently applied within Sweden, when all companiesagreed that the yield on government bonds should be used as a reference for the discountrate. A number of companies then started to refer to the yield on mortgage bonds, areference rate that is not one of the stated alternatives in the paragraph. This action hasbeen debated among the accounting practitioners in Sweden, as a possible deviation fromthe standard. A new interpretation and application of the paragraph has led to theemergence of a new accounting practice within Sweden, without an actual change in theregulation.Purpose: The purpose of this thesis is to analyze how the changes in interpretation andapplication of IAS 19 paragraph 83 resulted in a new accounting practice in Sweden.Research design: Two research approaches are used in this study. First, disclosures in theannual reports of all listed companies on NASDAQ OMX Stockholm Large Cap arestudied, to find the reference rates and discount rates used. Second, interviews with fourcompanies, the Big Four audit firms and one bank are conducted, to collect their opinionsregarding the situation. To achieve the purpose of the thesis, the results are then analyzedthrough the regulation, the situation in Sweden and two explanatory theories.Results and conclusions: The study shows that more and more companies have startedto use the YMB while fewer companies use the YGB. Also, it was a significant spreadbetween the highest and lowest discount rate used. The main explanations for thedispersion in the use of reference rates are the changes in the bond markets, the principlebasedregulation, incentive driven accounting practitioners and that companies strive forlegitimacy by imitating each other.Suggestions for further studies: As further studies it would be interesting to expand theanalysis and interview more companies on Large Cap. It would also be interesting toanalyze Small Cap and Mid Cap to see if the same results would be found. Also, it wouldbe interesting to conduct statistical tests to investigate the correlation between the level ofdiscount rates and reference rates used.