ASB announces rethink of controversial pension standard

The accounting standard for pension deficits which has caused much
inconvenience for companies, FRS17, has become the topic of an ASB research
project that could see it adopting further changes.

Earlier today, the UK standard setter announced that since the standard was
drafted, the legal and regulatory environment for pensions and changed,
necessitating a rethink to the structure of the standard.

‘Accounting for pensions remains one of the most important and controversial
areas of financial reporting,’ said ASB chairman Ian Mackintosh.

‘While FRS17 stands in comparison with any other pension accounting standard
in the world, the scale and significance of the changes that have taken place
since the standard was published has led us to conclude that the time is right
for a fundamental review.

‘We hope that our research will assist in the further development of
international accounting for pensions which will lead to a sound basis for UK
convergence.’

FRS17 became obligatory at the start of this year and required companies to
reflect the obligations they had to their defined benefit schemes in their
accounts. In many cases this saw massive pension deficits brought onto company
balance sheets.

Since the introduction of the new standard, companies have undertaken a
number of measures to reduce their pension deficits, including closing off their
defined benefit schemes, restructuring their asset allocations, refinancing
debt, and using the proceeds from sold-off subsidiaries to pay down their
deficits.