JAPAN - The implementation of new accounting rules that would have forced companies to book pension fund shortfalls as liabilities on their balance sheets is to be postponed, according to reports.
The changes, set out by the Accounting Standards Board of Japan, were due to come into effect this year as the second stage of a shift to value accounting. The move began in 2008 when firms were required to start using a discount rate valid at the financial year end in assessing their pension benefit obligations (PBOs).
The Board has been listening to companies' concerns about the immediate on-balance-sheet recognition of shortfalls calculated by accounting today for all their current and future PBOs and since early this year has been considering grace periods and other concessions, according to details of the review posted on the Japan Pensions Industry Database website.
Nikkei, which owns the country's leading financial newspaper and an actuarial consulting business, gave no clear reason for the delay when breaking the story of teh delay, but said: "As the [regulatory] revisions stand now, companies would not have to record liabilities on parent-only financial statements." The ASBJ was unavailable for comment.
Japan Pensions Industry Database founder Jo McBride said: "Change will come, but it may be delayed until 2015.
"By then Japan should have adopted International Financial Reporting Standards (IFRS) which take a different approach to the problem with any shortfall bypassing the balance sheet and impacting on equity directly."
In its annual review of Japan's asset management business published early this year, Nomura Research Institute estimated the unamortised PBOs of all Tokyo Stock Exchange First Section companies at ¥12trn yen on 31 March 2010 (then $128.44bn).
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