Urging the Accounting Standards Board to reconsider its Financial Reporting Exposure Draft 20 – FRED 20 – the NAPF said the proposal to require pension fund assets and liabilities to be valued on a market-related basis would result in considerable volatility in those values and in pension costs, one year to another.
It explained: ‘The approach set out in FRED 20 is likely to result in the recording of large fluctuations in the assets and liabilities of a company’s pension fund as shown in the company’s accounts, and the degree of volatility in these items may cause considerable anxiety to finance directors.’As a result, some boards may conclude that a defined benefit pension scheme involves a risk the company should not take.’
Dr Ann Robinson, NAPF Director General, said:’Without substantial modification, the ASB proposals run the risk of damaging occupational pension schemes without providing any significant increase in the information available to investors or producing a fair reflection of pension costs.
She added: ‘Nor will they fit well with emerging global standards.’
The NAPF statement follows a chorus of other criticisms from accountants and other business professionals.
The National Association of Pension Funds is the principal UK body representing the interests of the occupational pensions movement.
Members provide pensions for over seven million people in retirement, account for more than £450 billion of pension fund assets.
Employees facing pension scheme changes caused by new accounting standard, warns actuary