UK - The Accounting Standards Board (ASB) has published disclosure guidelines aimed at promoting greater transparency in financial reporting for defined benefit (DB) pension schemes.
As a best practice guide, the reporting statement, entitled ‘Retirement Benefits - Disclosures’, sets out six principles for companies to consider when reporting DB scheme deficits in their financial accounts.
These are: the relationship between the entity and trustees of the DB scheme; the principal assumptions used to measure scheme liabilities; the sensitivity of the principal assumptions; how the liabilities are measured; future funding obligations; and the nature and extent of the risks arising from financial instruments held by the scheme.
The disclosures recommended complement those set out in FRS17 ‘Retirement Benefits’ and IAS 19 ‘Employee Benefits’ and complete the ASB’s short term review of pensions accounting.
In May 2006 the ASB proposed to amend the disclosure requirements of FRS17 by replacing them with IAS19, leading to increased convergence of the two standards.
The Board said it had taken concerns into account in the final version, in particular responding to comments regarding the recommendation to disclose the estimated buy-out amount where it is already made available to members or trustees of the scheme.
However Donald Duval, chief actuary at Aon Consulting, expressed concerns over the move: "The ASB is recommending that companies should have to disclose their buyout deficits. But buy-out only applies if the scheme discontinues. The value of other company assets and liabilities would change dramatically if the company had to disclose their value on company break-up for immediate settlement.
"This is not consistent with the ongoing concern basis of company accounting. It seems bizarre that the ASB is only targeting pension funds in this way, and is not looking at all the other assets of companies."
Ian Mackintosh, chairman of the ASB, stated: “The publication of the Reporting Statement today brings to a close the short-term review the board has conducted into the disclosure needs for DB schemes. The review has resulted in an amendment to FRS 17 improving the disclosure requirements of FRS17 whilst bringing them into line with the requirements of IAS19.
“The guide aims to... [encourage] the disclosure of greater information regarding the risks and rewards of defined benefit schemes whilst allowing preparers the flexibility to provide disclosures that are appropriate to the risks their particular entity is exposed to.”
Ex-BHS owner Dominic Chappell has been ordered to pay a total of £87,000 in fines and court costs after he was found guilty of failing to provide The Pensions Regulator (TPR) with information.
The Department for Work and Pensions (DWP) has said it while believes in the benefits of consolidating defined benefit (DB) schemes, there are significant issues to overcome.
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