UK - The issue of whether a pension plan's accounts should be consolidated with those of the sponsoring company needs to be addressed, said the Accounting Standards Board.
In a discussion summary on the project related to the accounting for pensions, the ASB noted that the current standards simply duck the issue of consolidation.
“The question that needs to be asked is: Does the employer control the pension fund of not?” said an ASB spokesperson.
He explained that if the sponsor does not have control over the pension fund, then it has reason not to consolidate the accounts. However, if the company does have control over it, there should be no argument against consolidation.
“The present standards defy rationale and this issue must be addressed one way or another,” said the spokesperson.
The project is still in the early stages and as yet the issue of how liabilities should be measured has not yet been approached. What has been discussed at length is what should be reflected in the measurement of liabilities.
There are two main opposing views on this topic. Some believe pension liabilities should be linked to future salary increases while others feel such future liabilities should not be reflected in what are effectively today’s accounts.
No decisions have been taken, but a discussion paper is due to be published at the beginning of next year.
The project is being carried out by the ASB with the assistance of a pensions advisory panel appointed by the board as well as a pan-European working group selected by the European Financial Reporting Advisory Group.
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