Global accounting standard to wipe £10bn off pensions' profits
Favours reporting income and interest over expected returns
A NEW International Financial Reporting Standard could see UK pensions’ reported profits reduced by as much as £10bn.
The revised IAS 19, due to be published this month and applicable to accounts from 2014 onwards, will improve transparency and comparability in pensions reporting, KPMG claimed.
Profits will drop due to a move from subjective expected returns on assets credit to income with interest on the plan assets at the AA discount rate.
Mike Smedley, pensions partner at KPMG in the UK, said: “Our survey paints a relatively rosy picture for UK pensions this year … [but] it is unclear how long these benign conditions may continue.
“The new IAS19, due later this month, might also start to change companies’ views; some may reduce investment risk to coincide with the removal of the P&L credit for asset returns.”