| Employer fury sways ASB to consider easing pension accounting rules |
|
|
Most employers heaved a sigh of relief on Thursday on receiving news that there was hope for ‘strict’ pension accounting rules to be loosened, following the announcement by the Accounting Standards Board that it would evaluate and reexamine its previous financial reporting method of pensions.
It was acknowledged by the board that vehement resistance and criticism offered by employers, trustees and actuaries against the FRS17 pension standard, had indeed triggered the decision to initiate a review that would study the myriad issues surrounding the matter, to reach the core of the problem. The ASB said that the new pensions regulator as well as the Pension Protection Fund were also responsible for the review, as they save final salary occupational schemes in the event of a collapse of the firm/employer.
The FRS17 was criticized by many for rendering the valuation of pension fund deficits volatile through the “snapshot” rule. Employers wanted regulators to add greater flexibility and autonomy in ascertaining the fund’s total performance.
ASB said, “These changes could not have been anticipated when FRS17 was developed and may have an effect on the relevant financial reporting”, while maintaining that the accounting standards were still “good”.
Meanwhile, most top 100 companies of Britain were contributing to pensions beyond 20% of the salaries of employees in order to complete pension deficits stressed by the FRS17. However, the Pensions Institute and Cass Business School report based on feedback of employers through interviews said that many had planned to abide by the obligations in their individual funds, but would later switch over to personal-pension style schemes in the medium term by closing down these schemes.
The report underlined clear disappointment and angst amongst employers with the conspicuous rise in regulation in the past couple of years, which had in turn taken its toll on firms’ revenues and dividend payouts.
Chairman at Accounting Standards Board, Ian Mackintosh was quoted as, “Accounting for pensions remains one of the most important and controversial areas of financial reporting. While FRS17 stands comparison with any other pension accounting standard in the world, the scale and significance of the changes that have taken place since the standard was published has led us to conclude that the time is right for a fundamental review.”
The ASB notified further that it would assess sections that standard critics allege have been mistreated by employers, claiming that some employers have tampered with the discount rate and the expected return on assets in the fund by inflating them artificially to lessen deficits.
Posted
on : Sat, 15 Oct 2005 08:00 GMT | Pensions News
By : Anne Philips
|
| |
| Related |
|
|
|
