UK - The amendment to IAS19 issued by the International Accounting Standards Board (IASB) last week leaves uncertainty about the way pension benefits will be accounted for going forward, says Lane Clark & Peacock (LCP).
The amendment allows the option of recognising actuarial gains and losses in full in the period in which they occur, in a separate statement, outside the profit and loss account.
The option, which is similar to the requirements of the UK’s FRS 17 standard, is expected to provide a more transparent view of pension liabilities. Previously, IAS 19 required actuarial gains and losses (i.e. unexpected changes in value of the benefit plan) to be recognised in profit or loss, either in the period in which they occur or spread over the service lives of the employees.
Commenting on the change, Alex Waite, partner and head of LCP’s corporate consulting practice, said: “The IASB is clearly not entirely happy with these amendments as it has said that it intends to undertake a major project on accounting for post-employment benefits.
“It is disappointing that there will remain considerable uncertainty about the way in which pension benefits are to be accounted for going forwards.”
Waite said allowing two different options would make comparison of company accounts “harder”.
“We broadly welcome the IASB’s new standard, allowing companies the scope to use an accounting policy in line with FRS 17, which many UK companies have been expecting to adopt,” he said.
“However, giving two fundamentally different options means that it will be harder to compare company’s accounts consistently without digging through the notes.”
The new changes are likely to apply from 2006 onwards, although companies will be encouraged to use the new option from 2005.
Standard Life has increased exposure to risk assets in three out of five funds in its Active Plus and Passive Plus workplace pension ranges.
Some 48% of employers are unaware of the services or help they offer to members of their defined contribution (DC) schemes, according to Aon.
Jupiter Asset Management's Abbie Llewellyn-Waters, manager of the Jupiter Global Sustainable Equity strategy, explains why firms need to integrate ESG into their business model