US set to adopt FRS 17 model

Link: FRS 17 special report

In an interview with the Financial Times, Robert Herz, chairman of the US Financial Accounting Standards Board, said he wanted to take the FRS 17 approach, as adopted by the UK’s Accounting Standards Board.

He gave his reasons as wanting the US to achieve convergence with international accounting rules and to put an end to existing US pension accounting rules, which, he said, could produce misleading figures in companies’ earnings statements.

FRS 17, which forces companies to account for pension assets and liabilities on the balance sheet, and takes effect in 2005, has proved very controversial.

Some UK companies have blamed it for the closure of final salary pension schemes.

Currently US rules allow companies to spread the gains and losses made from assets over a period of years, rather than show them as a ‘snapshot’ on the profit and loss account as FRS 17 requires.

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