Thank you, Mr. Chair.
Mr. Ferguson, as Auditor General, you have identified three key observations, one of which is the government's selection of discount rates used to estimate long-term liabilities. To illustrate the material impact of this, you give the example on page 2.43 that a 1% reduction in the discount rate for estimating the accrued benefit obligation for unfunded pension benefits results in an increase of this liability to the tune of $7.7 billion.
This would clearly be significant, and it would overhaul significantly the financial picture. By using a higher discount rate, one could effectively lower the estimate for long-term liabilities.
On page 2.43, it states, “While we have concluded that the assumptions underlying the Government's significant estimates are within a reasonable range, historically, certain discount rates have been at the high end of the acceptable range when compared with market trends.”
Is there a difference between what you deem a reasonable range vis-à-vis an acceptable range? If there is, I'm assuming that a reasonable range would be better than an acceptable range. If that's the case, how do you determine what is reasonable and what is acceptable?