The body responsible for advising the EU on accounting issues has given the green light to proposed changes to defined benefit (DB) plans’ accounting rules.

The changes to IAS 19 mean that, with effect from 1 January 2019, companies will have to account for the effect of changes to a defined benefit plan in the current year by using updated assumptions to remeasure current service cost and net interest to the year-end.

Earlier this year, experts warned the changes could make income statements more volatile by increasing interest cost to the year end by as much as 10% on some estimates.

In a letter addressed to the European Commission, the European Financial Reporting Advisory Group (EFRAG) said the changes met “the qualitative characteristics of relevance, reliability, comparability and understandability required to support economic decisions and the assessment of stewardship”.

The endorsement letter added that the changes also satisfied the requirement for prudence under EU law, provided a true and fair view of an entity’s financial position, and were “conducive to the European public good”.

The changes have proven to be controversial and represent a potentially major departure from current practice.

The IASB published an exposure draft of the amendments to IAS 19 in 2015.

European Parliament flags concerns over IFRS 17

The European Parliament’s economic affairs committee (ECON) has published a draft resolution expressing a number of concerns about the International Accounting Standards Board’s new insurance contracts standard, IFRS 17.

The publication came as EFRAG was considering whether to request an extension of the deadline for it to provide endorsement advice to the European Commission on IFRS 17.

According to its latest minutes, EFRAG’s board was concerned by the tight deadline and was keen to make sure that interested parties had plenty of time to comment on the group’s draft endorsement advice.

Meanwhile, although the draft ECON resolution acknowledged that IFRS 17 would bring “the benefits of more consistency and transparency with the aim of increased comparability”, the committee also claimed that “significant efforts and costs are needed in order to implement IFRS 17 [while] also reflecting the complexity of the new standard”.

It goes on to raises a number of regulatory issues, among them a call for the EU to analyse how the new standard would interact with Solvency II requirements and the long-running issue of its interaction with IFRS 9, for financial instruments.

The European Banking Authority has already warned that the new standard treated similar transactions differently depending on the issuer’s industry.

In addition, the European Securities and Markets Authority (ESMA) has raised a red flag over the fact that the new standard allows companies to present a proportion of their discount rate changes in the “other comprehensive income” section of annual reports.

ESMA has already included the endorsement of the new standard as a priority on its latest work plan.

At the end of last year, IPE reported that insurers in the UK had flagged up major concerns about the new standard.

In a statement, the Actuarial Association of Europe (AAE) said it would welcome any extension to the EU’s review of IFRS 17 given the complexity of the new regime.

The AAE pointed to concerns about fundamentals of the new measurement model for insurance contracts, such as the contractual service margin and the different treatment of similar insurance business activities.

Trade body Insurance Europe has also raised concerns about the new standard .

ECON is scheduled to vote on the resolution during its 18-19 June session.

FRC plots new governance code for this year 

The chairman of the Financial Reporting Council (FRC) will publish an updated version of the UK’s corporate governance code this summer.

In a speech to an event in the City of London around the theme of trust in business, Sir Win Bischoff said the new code would “help business continue to deliver on the expectations of investors, the public and the economy”.

The FRC launched a consultation on revisions to the corporate code in December last year.

Sir Win also used his address to underscore the importance of culture in business, describing it as “a key ingredient in delivering long-term sustainable performance”.