Companies could be forced to remove surpluses from their books and widen deficits under new accounting interpretation
Accountancy Age, 04 Jan 2008
Accounting rules are set to force companies to take pension surpluses off their balance sheets, and widen deficits if they do not have control of the funds.
A new interpretation of accounting rules, IFRIC 14, will mean that if trustees have control of pension funds, the surplus will not appear on the company's books. Equally, if the trustees are demanding a higher level of funding, companies may have to widen their deficits, the FT reported.
Charles Cowling, managing director of risk advisory firm Pension Capital Strategies, said that the potential exists for some surpluses to no longer be there and for some deficits to get bigger.
'In my experience, as many as a quarter of scheme trustees have got pretty strong powers - often more than the company is comfortable with - so it could affect a fairly large number of schemes,' he said.
The new rule applies to 2008 which means that full reports will only appear next year but some companies may begin reporting in coming months especially where the rule could lead to significant changes in their books.
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