GLOBAL - The International Accounting Standards Board (IASB) has corrected earlier wording to its IFRIC 14 pensions accounting rules, which prevented some companies from recognising early pensions contribution payments as assets on the balance sheet.
The accounting body admitted in May that proposed amendments to IFRIC 14 had created "unintended consequences" and added a complication for a handful of companies, as its explanation of the rule meant any surplus in a defined benefit pension plan could not be treated as an economic benefit to the company but instead had to be seen as an expense, if the future minimum funding contribution required was more than the future IAS19 service cost. (See earlier IPE story: IASB admits unintended consequences to IFRIC 14)
The minor amendment now made means companies can now register any prepayment of pensions contributions as an asset, rather than as an expense, to the company.
The change would affect only a handful of companies, according to Colin Haines, partner at Lane Clark & Peacock, as many have not used the rule until this year and it only becomes mandatory on 1 January 2011. European companies are also not required to comply with the rule until the European Commission has completed its own review of IASB rules and its proposed changes.
IFRIC 14 is an interpretation of the IAS19 rules on employee benefits, governing many companies and the reporting requirements of pensions accounting, and had been described by some consultants as a "sticking plaster" to previous holes in the IASB rulebook.
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