European firms not ready for new pension standard
EUROPE – Watson Wyatt has surveyed continental European companies and found that most are not prepared for the new accounting standard for pension costs, IAS19.
The consulting firm said that only a third of 63 companies surveyed claim to be well prepared for the new standard. It added: “10% have undertaken no preparation at all.”
The similar FRS17 standard used in the UK has caused controversy. For example, the Trades Union Congress union body has said it “can present even previously well-funded schemes as being in serious deficit”. Watson did not poll UK and Irish firms as they are familiar with the issues.
Listed companies in the EU must report pension and other employee benefits costs according to the IAS19 standard from 2005,” Watson said. “However, the first assessments are needed for many companies with effect from 31 December 2003.”
The firm found that 31% of continental European companies claim to be “quite well” or “highly” prepared for IAS19. Sixteen percent had already adopted it.
“Only a minority believe they understand well the consequences for the investment strategy of their pension plans, or the management of plans in foreign countries,” Watson said.
“Our survey suggests that while most companies are thinking about and working on IAS19, the majority do not yet feel fully prepared and some have barely started,” said Eric Steedman, the Watson partner responsible for IAS19 consulting.
“IAS19 is not just a compliance burden, it is a great opportunity for companies, particularly multinationals, to understand their pension obligations better and manage them in a more consistent way.”
Transitional rules mean that the first assessments are needed from many companies from December 31.
Watson surveyed companies with an average 34,700 employees 34,700 and average turnover of 7.9 billion euros.