BAA, the international airport group, has said it would not move its pension scheme assets over to bonds as a result of the change in pension accounting forced by the new FRS 17 rule.
Accountancy Age, 21 Nov 2001
Andrew Hill, BAA's group financial controller, told Accountancy Age: 'There will be no immediate rush away from equities into bonds as a result of accounting change.'
BAA's move appears to lend support to FRS 17 when it is under fire from other companies who have seen their profits drop as a result of the new rule.
FRS 17 forces companies to recognise the full cost of pensions in a single year rather than spread over a number of years. BT has already announced a Pounds 4bn deficit in its pension fund as a result of the new rule.
The airport operator, led by chief executive Mike Hodgkinson, announced operating profits of Pounds 355m post FRS 17. Group operating profit pre-FRS 17 would have been Pounds 374m for the year ending 30 September 2001. BAA is one of the few companies that have opted for early adoption of the new rule, which takes effect in stages until 2003.
But Hill said: 'Adoption of FRS 17 increased charges of Pounds 19m to operating profit. But it has also included an asset of Pounds 227m on the balance sheet as opposed to a credit provision of Pounds 12m.'
Hill added: 'The way in which the standard seeks to record things in the balance sheet and profit and loss account is more logical than hitherto seen.'
While Richard Branson and his Virgin Galactic team chase the...
Comments
Have your say on this article