GLOBAL - The International Accounting Standards Board has published a "near final" draft of its revised pension accounting standard IAS19 - confirming key changes that could see billions wiped off company profits.
The revised standard is to remove two key features of existing pensions accounting standard - the use of expected return on assets and corridor accounting options.
In many cases these changes will significantly hit company profits industry figures believe.
The new standard also overhauls the rules on what must be disclosed in company accounts, with the intention of giving investors more information about the risks that companies run in their pension schemes.
LCP partner Tim Marklew gave the draft a cautious welcome. He said: "The new IAS19 is a shorter, simpler standard, with much less subjectivity in setting assumptions and more flexibility in providing appropriate disclosures. While the IASB has not made a compelling case for all the changes, overall it's a step in the right direction. "
LCP head of corporate consulting Alex Waite (pictured) added: "As expected, the IASB have drawn an end to the crediting of ‘magic money' to company profits.
"Under rules originally inherited from the US, pension accounting standards have up to now effectively encouraged companies to adopt risky asset strategies, and anticipate high future returns. This increased reported profit, without necessarily adding value."
Final publication of the new standard is expected later this month.
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