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New regulator backs NIVRA on IFRS

NETHERLANDS -- The IFRS accounting rules require than companies with a pension fund that is part of an industry-wide scheme are required to carry their pension liabilities on their balance sheet, according to the new Dutch regulator for the financial markets, or AFM.

The decision is in line with a recommendation by the Dutch accountants’ association (NIVRA) and the consultancy PriceWaterhouseCoopers, which was opposed by the Association of Industry-wide Pension Funds (VB), which claimed that publishing the annual pension receipts amount would be adequate.

The issue surfaced due to concerns among accountants that companies with pension schemes that are a member of an industry-wide pension fund could still be hit by stockmarket risks.

According to NIVRA, it is insufficient for companies to report only their pension payments without showing their pension fund’s overall financial situation. NIVRA claimed that such issue could pose problems for a number of companies in the construction and metal sectors.

But the VB has claimed that the stock market risks for companies that are a member of industry-wide pension funds are minimal.

“Depending on the financial arrangements, these companies can’t be forced to fill in financial shortfalls like company schemes,” said VB director Borgdorff.

“Although the yearly pension premiums can vary, they are partly paid by the employers, “ he added. “Moreover, the schemes can cut their indexation, through which the variation of premiums can be kept to a minimum during bad times.”

The more than 80 industry-wide schemes have claimed that establishing the assets and liabilities of each individual participating company is impossible and noted that in such situations the IFRS regulations allow the registering of only the yearly premium as if the pension fund were a defined contribution scheme.

However, NIVRA countered that making the necessary calculations appeared to be possible in cases where a company was engaged in a merger.

But whether the AFM decision will have any direct impact on industry-wide pension funds any time soon is still unclear. It is the projected new supervisor of annual financial reports by Dutch quoted companies, and will begin operations next year so currently it has no formal authority to implement changes.

“The AFM is talking out of time”, said Borgdorff. “We will discuss the matter shortly with NIVRA, and I am sure we will find a solution.”
In June, NIVRA indicated that it was not prepared to change its position. “Nothing has changed since then”, a spokesman told IPE. “But we will discuss the matter based on arguments.”

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