Pension schemes face rules hit
Companies could be forced to remove surpluses from their books and widen deficits under new accounting interpretation
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.
Further reading:
UK
pensions’ end-2007 surplus $29.74 billion