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.’
Andrew Tyrie airs views on the Finance Bill, 'Making Tax Policy Better' report, and Brexit
In our latest managing partner Q&A looking towards 2017, CVR Global's Richard Toone talks about recruitment, and the potential threat of competition from the legal sector, as key issues for the firm in the coming year
Deloitte to avoid tendering for government contracts over the next six months, to appease Theresa May following consultant's report that painted a less-than-flattering picture of Brexit plans
In our first Q&A looking towards 2017, Menzies senior partner Julie Adams flags up increasing digitisation, aligned with more hands-on consultative services, as the key mix for her practice