UK plc faces pensions chaos

Experts warned this week that UK directors, already struggling to comply with the controversial new British pensions standard FRS17 by a 2003 deadline, face the imposition of a new set of international rules just two years later.

Brussels has demanded all listed European companies switch to international standards by 2005. And unless international standard-setters can be convinced to follow the British model on pensions accounting by this time, British finance directors face yet another set of significant changes in this complex area.

The main difference at present is that, under the new UK standard, businesses have to show pension funds gains and losses as they occur, whereas under international rules, they can spread them out over time.

The controversy surrounding pensions accounting was highlighted earlier this month as a firm of actuaries, Lane, Clark & Peacock, disparaged some of the UK’s leading FTSE companies for below average pensions disclosure.

One of the companies named and shamed was BAT, whose non-executive director is Kenneth Clarke, a contender in the Conservative Party?s leadership contest.

The company said: ‘We are surprised to be highlighted given the documents we disclosed.’

The actuarial firm’s report also looked at the way such companies will be hit by the new British accountancy standard.

Although most are aware of this, and the significant impact it could have on their balance sheets and reported profits, few are aware of the further changes that could be required after they get to grips with FRS17.

John Ralph, pensions expert at Boots, said there ‘will be a huge job of education’ for external understanding of pension results.

Standard-setters are, however, working on harmonisation between British and international standards. Allan Cook, technical director at the UK Accounting Standards Board, said: ‘We are reluctant to have them [UK companies] go through that process. We are trying to get the IASB on side.’


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