The decision means companies that have over-funded their pension schemes may in some cases have to record the surplus as a liability.

When IFRIC14 comes into force, companies will have to recognise an additional liability under IAS19 if the minimum funding requirement creates an ‘onerous obligation’ – a duty to pay additional contributions to the plan that will not be returned to the employer as a refund or be translated into lower employee contributions.

David Fogarty, a partner in Mercer Human Resources Consulting’s financial strategy division, said: ‘On an accounting basis, many FTSE 100 company schemes are now fully funded and a good number of others are nearing that position.

‘In future, companies may want to re-direct their investments from equities to bonds as any visible economic benefit of accumulating surplus assets may be lost.’

The International Accounting Standards Board division hammered out the new rules in a bid to standardise practice and have extra assets recognised on a level playing field.

‘This change will force many companies to consider where to position their funding targets and extent to which they should be taking investment risks with their pension plans,’ said Fogarty.

Many companies and trustees are discussing setting a funding policy and investment strategy that aims to accrue assets above the current IAS19 accounting liability.

However, Mercer believed that the new IASB guidelines would mean additional funding would disappear into an ‘accounting black hole’.

IFRIC14 comes into force for annual accounting periods starting from 1 January 2008.

COMPANY REPORTS

KPMG calls for CFC dialogue

UK-based companies with offshore divisions are being encouraged to enter into talks with the Treasury before new proposals on the taxation of the overseas arms are finalised. Companies seemed hesitant to respond to a Treasury discussion paper, according to KPMG, which outlined sweeping changes to the tax treatment of offshore operations.

The government’s tax policy chiefs have offered an olive branch in the form of plans to exempt foreign dividends from tax, but companies are being urged to open discussions and ensure that the proposed anti-avoidance measures for controlled foreign companies are not excessively constrictive. Sue Bonney, the Big Four firm’s head of UK tax, said: ‘If UK business fails to engage with the authorities, it will be on shaky ground if it later complains about the final shape of the reforms.’

iSoft agrees £160m offer from CompuGROUP

iSoft has agreed an all-cash offer of £160m from software provider CompuGROUP UK Ltd. CompuGROUP UK is a newly-formed, wholly owned subsidiary of CompuGROUP Holdings AG, a software company quoted on the Frankfurt Stock Exchange.

CompuGROUP’s offer depends upon iSoft shareholder approval and permission from the courts. iSoft will also have to pay IBA nearly £1.4m for pulling out of a previous takeover deal by the company: ‘iSoft has agreed that it will serve notice on IBA terminating the IBA Implementation Agreement, which will trigger an obligation on iSOFT to pay to IBA an inducement fee of £1,397,137,’ it said in a statement to the stock exchange.

Google man settles SkillSoft claim

Google’s chief legal officer and Ernst & Young have settled claims by the US Securities and Exchange Commission for accounting misstatements at the executive’s former employer, SkillSoft Plc. David Drummond, who served as chief financial officer at New Hampshire-based Skillsoft until 2002 while it was known as SmartForce, agreed to pay $574,000 (£287,000) to settle claims that he let the company overstate revenue, the SEC said in a statement yesterday. The SEC censured Ernst & Young in Dublin, which agreed to pay $725,000, because it did not assign auditors with enough expertise to examine the software company’s accounts.