Government looks into pension rules
The government's work and pensions secretary has held talks with the Accounting Standards Board as unease grows over discrepancies between the UK's new pensions standard and the international rule.
Alistair Darling held a meeting with Mary Keegan, chairman of the ASB, and Allan Cook, technical director, last week to discuss the impact of FRS 17, due to take full effect in 2003, and IAS 19 with which listed companies must comply by 2005.
Darling told the BBC’s On the Record: ‘I had the Accounting Standards Board in to see me and I made the point that the standard we have in the UK is different from the international accounting board standard. They’re thinking about that.’
The ASB has however been very aware of the differences between the two standards following a ruling by the European Commission endorsing international accounting rules.
UK plc, together with all other European listed companies, must adopt IASs in 2005, but they are also having to contend with radical changes to UK accounting standards in the meantime.
Allan Cook told Accountancy Age.com: ‘We’ve been saying this for 12 months and explaining the differences between the two standards.’
The ASB has been trying to ensure convergence between its standards and IASs to reduce the impact of the change-over in 2005.
The main difference between FRS 17 and IAS 19 is that the international rule allows a pensions’ surplus or deficit to be disclosed and then amortised over a long period, usually 15 to 20 years.
But FRS 17 requires companies to recognise the pensions’ assets and liabilities immediately in the balance sheet. It does not allow for any smoothing mechanism to reduce volatility which is causing much consternation in the UK at present.