EUROPE - The introduction of the IAS19 accounting standard will change the way companies consider their pension obligations and plan design, according to Eric Steedman, a partner at Watson Wyatt.
Steedman said that the new standard would be one of the key driving factors that will change the European pensions landscape.
“The introduction of the FRS17 in the UK has been cited as one of the drivers moving companies from DB towards DC. It would be a bridge too far to say that IAS19 will lead to a wholesale move towards DC in Europe, but it will inevitably have an effect on the way companies consider their pension obligations and plan design,” he said.
Steedman added: While IAS19 will certainly not be the only factor driving change, because it will encourage more board-level interest in pension obligations it will inevitably lead boards to ask questions such as 'have we got the right benefit design?' and 'have we got the right investments held against the benefit obligations?' This in itself is likely to lead to changes.”
With limited exceptions, listed companies in the EU for their consolidated accounts must use IAS19 by 2005.
Watson Wyatt recommends that companies that have not yet begun preparing for the introduction of IAS19 should consider drawing up a rigorous project plan over the next few weeks.
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