Concern voiced over FRS 17 volatility
Accountancy firms' welcome of new pension standards has been tempered with concerns over volatility and analysts' understanding.
FRS 17 ‘Retirement Benefits’, which forces companies to disclose more information about the status of their pension assets, does not take effect until 2003, but opposition from business has been fierce.
Business leaders’ greatest worry centres on the FRS 17 requirement to account for pension surplus and deficits immediately, which they believe could force them to stop offering final salary pension schemes.
Pension assets – valued at £250bn for FTSE-100 companies – are currently calculated using actuarial assumptions spread over a number of years resulting in less fluctuation.
Chairman of Deloitte & Touche UK, Martin Scicluna, said: ‘While we welcome a standard that brings UK practice closer to that required by IAS 19, we understand the concerns of those who view the increased balance sheet volatility and consider it a move away from the key figure – the expected cash outflow required to fund the employees’ pensions.’
Accountants, actuaries and companies, however praised the Accounting Standards Board for the provision of an extended implementation period.
Martin Lowes, partner at Bacon & Woodrow, said: ‘The delay in full implementation will give time for other fair value accounting standards to be introduced. This is good as it means that pensions will be seen just as one of the many risks of running a business, rather than sticking out on its own.’
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