UK - Over half of the companies in the UK will see a reduction in their balance sheet assets as a result of FRS17, according to William M Mercer.
Mercer, analysing the effect of FRS17 on companies and their balance sheets, found that 43% of firms will see their 2001 assets fall by up to 20%. More worryingly, Mercer found that 9% of firms will experience a fall of 20% or more. The figures are modelled using data from a sample of the top 500 UK listed companies.
A year ago, FRS 17 would have produced a healthier balance sheet for the majority of companies in spite of a year of falling markets. But the situation is different now - pension fund assets fell again by an average of 10% in 2001, explained Tim Keogh, European partner at Mercer.
Perversely, Mercer found that FRS17 proved to be beneficial when applied to FY2000 corporate balance sheets. Just under a quarter of the firms surveyed were found to have had weaker balance sheets as a result of FRS17. The vast majority found that their results were strengthened by up to 20%.
Mercer claims that the worst affected firms will be those that are “more like a pension fund with a company attached”, rather than a company with a retirement scheme. The survey found that 28% of the firms surveyed had a pension fund worth more than the firm’s net assets.
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