Mercer warns of 'less transparency' under new accounting
NETHERLANDS - Replacing the present accounting rules for unlisted Dutch companies, as proposed, could lead to a decrease in transparency, a partner at Mercer Consultants has suggested.
Responding to the recently published concept guidelines from the Dutch Accounting Standards Board (RJ), Tim Burggraaf said: “A change to the accounting standards does not automatically change the underlying risk, and companies want to know their pension risks at this very moment.”
The new guidelines - also known as RJ 271.3 - are based in IAS19 and focus on liabilities, rather than risks, as this fits better with the Dutch pension system, the RJ explained when it unveiled the proposals. (See earlier IPE story: Dutch accounting rules to relieve companies)
In Burggraaf’s opinion, the current mark-to-market accounting system at least provides a set of rules applicable to both listed and unlisted companies.
Although there is strict supervision of premiums, under the Pensions Act, to ensure they cover costs, the differing practices between one company and another means any future rises in pension claims may not always have been accounted for in contributions were they to be displayed under the terms of the new rules, he claimed.
“Because the accounting principles and the financial assessment framework FTK work under separate rules, the new RJ rules could lead to a discrepancy between the real risk for a company and the apparent provision,” suggested Burggraaf.
Moreover, companies which have placed their schemes with an insurance firm without having covered all risks are not paying a regulator-checked contribution, according to Burggraaf.
“So far,there has been a shortfall or surplus of these pension claims on the balance sheet of the companies involved for approximately one million participants. And although the FTK [rules are] also for insurers, it only applies to their pension portfolios,” stressed Burggraaf. “Therefore, a company risk is not always covered by the insurance.”
Although Mercer’s Burggraaf has raised concerns, neither the Foundation for Company Pension Funds (OPF) nor the large employers’ representative body VNO-NCW share his view.
“We whole-heartedly support the new rules, because they bring the position of pension funds more into line with their sponsoring companies,” commented an OPF spokesman.
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