❓ Mr. Kobelke questions the WA Police Minister regarding a $4.560 million budget excess in 2008-2009 related to 'movement in leave liability'. The Minister explains the excess was due to actuarial adjustments influenced by interest rate reductions during the Global Financial Crisis.
AnsweredQoN 2478Legislative Assembly
QuestionView source ↗
Can the Minister give a full and detailed explanation for the Western Australia Police budget excess expenditure in 2008–2009 of $4.560 million relating to ‘movement in leave liability’?
AnswerView source ↗
Answered
1 April 2010
Responded by
Minister for Police
Response time
16 days
Calculation of Leave Liability is based on the nominal value of accrued Leave (Annual, Long Service Leave and other Special Leave as may apply) which is reported in accordance with the International Accounting Standards. This involves Actuarial Adjustments for factors such as:
the probability that employees at any time during the accrual of Long Service Leave will remain an employee of the agency to eventually qualify for the leave (ie becomes unconditional),
the amount of current unconditional leave (in weeks for example) that will be taken within the current, and future leaves - which will affect the value of the leave (due to pay increases)
the cumulative value of the current amount of leave accrued, then discounted at an appropriate investment rate into current dollar values.
The discount rates, (the last point above) can cause substantial movements to the calculated value of Leave Liabilities. During late 2008, following the beginnings of the Global Financial Crisis, Central Banks reduced official interest rates substantially, subsequently reducing the investment rates used in the actuarial costing model. Being used as a discount rate, a drop in the official interest rate causes an increase in the final value of the leave liability. The $4.560 million was the estimated impact to WA Police.
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the probability that employees at any time during the accrual of Long Service Leave will remain an employee of the agency to eventually qualify for the leave (ie becomes unconditional),
the amount of current unconditional leave (in weeks for example) that will be taken within the current, and future leaves - which will affect the value of the leave (due to pay increases)
the cumulative value of the current amount of leave accrued, then discounted at an appropriate investment rate into current dollar values.
The discount rates, (the last point above) can cause substantial movements to the calculated value of Leave Liabilities. During late 2008, following the beginnings of the Global Financial Crisis, Central Banks reduced official interest rates substantially, subsequently reducing the investment rates used in the actuarial costing model. Being used as a discount rate, a drop in the official interest rate causes an increase in the final value of the leave liability. The $4.560 million was the estimated impact to WA Police.
Notice: This document is created or edited using unregistered or evaluation copy of rtLib valid for testing or development purposes only. To use it for productive or any other purposes please register it. You may purchase the license on
http://www.rtlib.com
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