PracticeConsultingMultinationals drag heels on FRS 17

Multinationals drag heels on FRS 17

Less than 10% of UK multinational companies are planning an early implementation of controversial new pensions accounting standard, FRS 17, which becomes fully active in 2003.

This is despite a recommendation from the Accounting Standards Board that companies adopt the new standard as soon as possible.

A survey of 60 of the UK’s largest multinationals by human resource consultants William H. Mercer found that only 8% of them planned an early implementation of FRS 17, with almost two-thirds undecided on timing, and the remaining 32% saying they intended to hold back.

The firm emphasised that the new standard will affect companies operating pension plans both within and outside the UK. It found that only a quarter of companies had completed a review of FRS 17 and its effect on their overseas pension plans. One third said they were planning a review of some kind, while the remaining 39% had made not plans or said it was too early to say.

Under FRS 17, due to take effect in 2003, companies will have to measure assets and liabilities using market values rather than at historical cost.

It will require companies that operate defined benefit pension schemes to recognise in their balance sheets the surplus or deficit in the scheme, to the extent that the company can benefit or suffer from it.

Paul Kelly, European partner with Mercer, said FRS 17 would apply equally to foreign pension schemes as UK ones, and added ‘there will be none of the escape clauses of SSAP 24’.

However he understood companies’ reluctance, as the effect could be ‘detrimental to their profit and loss accounts’, and could ‘knock millions off the bottom line profits’.

‘Where this is the case, it?s not unreasonable to want to delay action until the last minute,’ Kelly said.

Companies with operations in Australia, Germany, the Netherlands and US, followed by Canada and South Africa, have been mentioned as most likely to be affected by FRS 17.

Links

FRS17: Time is short

Concern voiced over FRS 17 volatility

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