EUROPE - Royal Dutch/Shell Group pension fund will realise a reduction in net assets of US$4.9bn when the IFRS reporting standards come into effect in January 2005.
Under the Europe-wide move to IFRS accounting, the company is obliged to include all unrecognised actuarial gains or losses on defined benefit pension plans in its financial statements, currently published under US and Netherlands GAAP.
RD/Shell said at the end of 2003, it had a surplus of US$3.7bn in its defined benefit pension plans, excluding unrecognised losses of US$7.3bn, the report noted.
With the move to IFRS reporting, these losses must now be recognised fully on the balance sheet and combined with a corresponding tax relief, this results in a US$4.9bn reduction in the company’s pension assets.
The change to accounting policy on employee benefits or pensions, IAS19, is the “most significant” policy change, noted one analyst.
“The reduction in capital employed is substantially the reflection of the recording on the balance sheet of unrecognised gains and losses related to employee benefits as at the date of transition, on January 1, 2004,” said group controller Tim Morrison.
“There is no impact on the actuarial position or funding of the pension funds which continue to be well funded.
“I should add that IAS19 will cause some additional volatility compared to FAS87 although for the time being, we will continue to use the corridor approach for amortising experienced gains and losses.”
The net loss on pension assets is a one-off adjustment to bring the balance sheet in line with the new standards.
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