UK - The International Accounting Standards Board (IASB) has confirmed it will no longer allow companies to use the corridor method in their accounting.
IASB board member Stephen Cooper told delegates at the National Association of Pension Funds (NAPF) Investment Conference 2010 the standards board would remove the corridor approach, which is used by some companies to smooth out the pension amount recognised on the balance sheet.
He said the removal of this approach had received a lot of support - not least from investors - because when using it the balance sheet shows no relationship to the funding level.
Cooper confirmed the IASB would release its exposure draft in a few weeks in which it outlines the changes.
He also said the IASB will make other comprehensive income mandatory and for OCI and profit and loss to appear next to each other as an overall statement of OCI.
This comes after the IASB had proposed that the interest on the surplus for the deficit should be recognised in a company's profit and loss account - and other items, which come under actuarial gains and losses, should be recognised under other comprehensive income OCI.
Cooper was speaking after NAPF chairman Lindsay Tomlinson told delegates there were "mark to market flaws" when the standard is applied to long-term institutions.
He said the current methodology did not take into account the long-term nature of pension scheme liabilities because markets were never "perfect".
Tomlinson said: "Should equity markets changing in one quarter affect a scheme payable in years to come? The daily rise and fall of markets is not the way to go for this. The IASB has a lot of explaining to do."
Financial Reporting Council chief executive Stephen Haddrill said it changes should be immediately recognised but more work was needed to move forward.
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