FRS 17 'terrible' for top companies
The controversial pensions accounting standard, FRS 17, is again under fire, as actuaries predict it will have a terrible impact on leading companies.
Pensions experts Watson Wyatt estimated the combined pension deficit for companies under FRS 17 as at the end of December 2002 was £130bn – up from £10bn at the same time last year.
This downturn was attributed to a 25% drop in the value of the stock market in 2002, and Watson Wyatt said companies would have to inject £65bn into pension funds over the next couple of years to make up the shortfall.
Under FRS 17, the value of pension funds must be disclosed on the balance sheet. As yet this is not an accounting standard until 2005, although companies are required to disclose the value of assets and liabilities of their pension schemes in notes to the annual accounts.
The rule has been blamed for many companies’ decision to close their final salary pension schemes to new employees.