The Accounting Standards Board broke with international consensuscounting. this week, as it published a discussion paper on accounting for pensions schemes.
The paper, ‘Aspects of Accounting for Pension Costs’, supports the international move to recognise pension assets at their current market value, but rejects the international standard’s approach to estimating liabilities. Where IAS 19 requires liabilities to be estimated using the market rate for high-quality bonds, the ASB prefers a higher discount rate based on equity values.
The discussion paper flags the ASB’s campaign to expand the role of the statement of total recognised gains and losses (STRGL), which in one option would be the mechanism for recording fluctuations in pension fund values.
This idea contrasts with the current IAS, which puts pension-related gains and losses through the profit & loss account, but allows them to be spread over 20 years.
‘We think that’s pathetic; it’s following a 20-year-old US standard,’ said ASB chairman Sir David Tweedie.
Corralling fluctuations in pension fund values in the STRGL was new and controversial, Sir David added. But the treatment had some support internationally and, if adopted, could open the way to harmonise UK and international practice. It also previews the approach the ASB is likely to take in its review of FRS 3: ‘Financial Reporting’.
The ASB had hoped to release the pensions discussion paper in tandem with the FRS 3 exposure draft, but that would have delayed it by up to six months. Comments on the pensions would help the board deal with FRS 3, said Sir David. ‘The IASC is waiting to see what happens,’ he added.
The ASB also released two other documents today: a voluntary best practice statement covering preliminary announcements, and an exposure draft of the Financial Reporting Standard for Small Entities that includes elements distilled from recent FRSs on goodwill and intangibles, impairment and, where relevant, joint ventures.
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