UK Construction giant the Costain Group has become the first listed firm to implement fully the UK's new accounting standard FRS17 for its pension scheme and company accounts.
The company’s defined benefit pension scheme surplus of £34.6m is shown on its accounts for the year ending December 31, 2000.
Costain Group financial director Miles Roberts - who described the new accounting standard as “not especially difficult” - explained the changes to his company accounts.
He said: “What you are really doing is putting through your profit and loss account at the operating profit level, the true cost of providing pensions to your existing staff.”
Roberts added: “If you have a good surplus on your account and you are taking a pensions holiday, that holiday will disappear so you charge to your operating costs these full costs.”
He said that the flip side to this was that assets would show excess growth.
Costain’s decision to use FRS17 came in advance of the deadline for its mandatory introduction for all accounts with year endings after June 22, 2001.
The minimum compliance after this date is for companies to calculate the effects of FRS17 in the notes to their accounts. Boots was one of the first companies to do this.
Full compliance with FRS17 will need to take place for all accounts with calendar years ending in 2003. Opinion is split on whether companies should seek early or late full compliance for FRS17.
Watson Wyatt partner Robert Hayles advised companies to declare FRS17 in the notes to their accounts as the first option. He reasoned that full compliance for this year would require the extra work of re-calculating last years accounts on an FRS17 basis.
Gissings’ director In charge of pension scheme accounting Tom Kelman warned companies that they should not leave FRS17 until the last minute as the valuations would take longer than they might imagine.
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