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German pension accounting under review

GERMANY – A new accounting standard is set to have a major impact on the German pension system, says consultancy firm Hoefer.

The German accounting standards board is set to conduct a hearing on the new accounting standard E-DRS 19 “post employment benefits in consolidated financial statements” tomorrow. Professor Rheinhold Hoefer, chief executive of Hoefer Vorsorge-Management says the new standard will affect all five types of German pension promises.

Speaking at the German pension industry body Arbeitsgemeinschaft fuer betriebliche Altersversorgnung’s conference in Bonn today, he described the standard as “similar to IAS 19 and FRS 17 but then again completely different”.

“It’s going to have a very big impact as it is valid for all five types of German pension promise and similar liabilities,” Hoefer said.

The new standard will affect book reserves, and Germany’s four other types of pension promise - support funds, direct insurance, pensionskasse and pensionsfonds.

The new standard will only the affect of the holding company, Hoefer believes that it will lead to a negative impact on company credit ratings as ratings agencies look at the balance sheet of the holding company.

The draft is expected to be put before the ministry of law in the summer and will be implemented next year although as Hoefer points out 2004 accounts will be compared with 2003 accounts which means that it has already taken effect.

Muelheim-based consulting firm Hoefer has 250 employees and runs the employee benefit plans of more than 4,000 companies.

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