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Analysts’ concerns pensions liabilities ‘understated’ in IAS accounts

UK - A sizeable proportion of City analysts regard pension liabilities disclosed in a corporate's accounts under IAS19 as an underestimate, according to a survey among 150 UK-based firms.

While 47% of responses regarded the disclosed liabilities as a fair estimate of the true liabilities, 41% regarded them as an underestimate, with the remaining 12% considering them to overstate the true liabilities.

"This may indicate that companies with large pension liabilities are possibly seeing a greater impact on their share price than the IAS numbers might suggest," say Pensions Capital Strategies PCS), an advisory firm which undertook the survey.

In assessing the value of a company, 70% of analysts responding always include the net pension surplus / deficit.

Nearly all of the 40 analyst responding (97%) would like to see pension scheme solvency positions disclosed to shareholders.

A high proportion (86%) would favour information on key pensions scheme ‘balance of powers', such as funding and wind-up disclosed to shareholders.

On a more general note, most analysts (84%) say they would view a switch from equities into bonds of pension, which would reduce finance income to the P&L and consequently earnings per share, as being "financially neutral"; 16% felt it would be negative.

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