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Germany’s Heubeck in pension transparency call

GERMANY - German pension advisor Heubeck AG has urged German companies to provide more transparency regarding their pension liabilities to rating agencies and banks or face the threat of financial exclusion.

At a recent seminar in Cologne, Heubeck stressed that while German accounting standards, known as HGB, would continue to be the norm for many companies, the pressure on them to “orient themselves” to international accounting standards (IAS) was building.

Hence, Heubeck said that to obtain a rating – crucial for raising money on capital markets or even obtaining bank loans – German companies, including those which stick to HGB, had to provide more in-depth information about their pension liabilities.

“This year’s planned revision of IAS 19 means that company reports may have to include ten pages dealing exclusively with occupational pensions schemes,” Richard Herrmann, board executive at Heubeck, told the advisor’s 150 clients at the seminar.

The seminar took place amid a debate in Germany over whether pension liabilities at German companies which keep these obligations on the balance sheet are fully-funded.

International rating agencies like Standard & Poor’s have argued strongly that they are not. S&P says that unless the liabilities are removed from the balance sheet and bundled together in an external fund, they must be treated as debt.

But German pension experts like Wolfgang Gerke, a professor of finance at the University of Nuremberg, retort that S&P’s view is wrong-headed. He insists that S&P disregards the traditional German book reserve system -which allows companies to fund their liabilities through returns on operating assets.

“I’m personally a big supporter of the idea that German companies should set up external pension funds, but that doesn’t mean one should discriminate against the old model,” Gerke said.

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