UK - The UK Accounting Standards Board (ASB) has revealed it has made some "tentative" decisions on proposals relating to the financial reporting of pensions including immediate recognition of pension assets and liabilities.

In the latest edition of its newsletter Inside Track, the ASB provided an update on the progress of its "Re-deliberations on the Pro-Active Accounting in Europe (PAAinE) Discussion Paper ‘The Financial Reporting of Pensions'".

It confirmed it is currently deliberating the more than 100 responses to the discussion paper, issued in January 2008, which outlined suggestions for improvements to the existing International Accounting Standard 19 (IAS19) to feed into the review of the rules being conducted by the International Accounting Standards Board (IASB). (See earlier IPE article: ASB calls for 'fundamental' accounting review)

The full report on its analysis of the responses and final views is expected in the summer, however the organisation revealed five "tentative decisions have been reached by the ASB in its re-deliberations of the discussion paper".

These include the decision that pension liabilities should not include estimates of future salary increases, while the unit of account should be based on the liability to the individual employee rather than the workforce.

It also reaffirmed its earlier view suggesting pension assets and liabilities should be recognised in financial accounts immediately, though it has agreed to consider alternative presentation options and views on its original proposal for the actual return on assets to be presented as part of a company's finance income.

The ASB also said cash flows to be used in the measurement of pensions liabilities "should be explicit; based on observable market prices adjusted for entity specific circumstances; unbiased whilst incorporating all available information on present earned benefits; and correspond to conditions at the end of the reporting period".

The body admitted that in "some circumstances this would change the cash flows currently used by actuaries to measure liabilities" as at the moment there is some allowance for risk.

The update on the progress of the report follows comments from the ASB chairman Ian Mackintosh in October when he revealed the organisation was reconsidering its idea of a risk-free discount rate following strong criticism from the industry and suggested the ASB would have to issue a separate paper dealing with the topic. (See earlier IPE article: ASB to reconsider risk-free discount-rate)

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