The standard – FRS17 ‘Retirement Benefits’ – will alter the way pension schemes are shown in the balance sheet. Many business leaders oppose the new rule based on market values instead of actuarial assumptions because they say it will generate unprecedented volatility in the accounts.
Sir David Tweedie agrees, but argues the current method does not reflect a company’s true standing and misrepresents the true situation to shareholders, investors and analysts.
As a peace offering, the ASB has granted a long implementation period for companies to adapt to the standard and for the standard-setter to gauge whether there are any insurmountable difficulties.
‘It will come into force in 2003. The reason is because it is quite complicated and it also gives us a chance to see the numbers,’ Sir David told Accountancy Age. But ‘early adoption is welcome’, he urged.
The standard aims to show whether a company is in deficit or surplus by showing the figures in the statement of total recognised gains and losses – STRGL – and operating costs in the profit and loss account.
‘STRGL appears on the balance sheet after net assets. It doesn’t hit the p&l, so this will stop it from diving all over the place,’ explained Tweedie.
Richard Abramson, partner at Lane, Clark & Peacock, said: ‘We wait with baited breath to see if our clients will react adversely. We also remain worried that it’ll affect the future of final salary schemes.’
Companies fear shareholders will get worried over potential fluctuations in the balance sheet. But, Sir David argued: ‘Is it best to keep shareholders in the dark? An accountant’s job is to show what the figures are. The management’s job is to explain the figures.’
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