GLOBAL - The International Accounting Standards Board has published an exposure draft of proposed amendments to IAS19, dealing with how pension costs are recorded in company accounts.
Firms will now be required to account immediately for all estimated changes in the cost of providing benefits and all changes in the value of plan assets.
The IASB has also proposed the removal of the ‘corridor' method, which is used by some companies to smooth out the pension amount recognised on the balance sheet.
And companies will also be required to use a new presentation approach that clearly distinguishes between different components of the cost of these benefits.
Companies will also have to disclose clearer information about the risks arising from defined benefit plans.
IASB chairman David Tweedie (pictured) said: "IAS 19 was inherited from our predecessor body and an overhaul of pensions accounting is long overdue. The proposals, if adopted, will significantly improve the transparency and comparability of pension obligations.
"We now seek input from interested parties in order to refine the proposals further, with the aim of publishing a final standard in 2011."
Industry experts believe this could cost firms as much as £10bn (US$15.25bn) a year. KPMG said the changes - announced today - would hit UK businesses' earnings and have an impact of over £50m per annum on employers with the largest pension schemes.
Pensions partner Mike Smedley said: "While the move will no doubt improve transparency, for some companies it will be a blow to reported profits which they may be under pressure to make up for elsewhere.
The exposure draft - Defined Benefit Plans - is open for comment until September 6. It can be accessed here.
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