The Financial Reporting Council (FRC) has confirmed it will press ahead as a matter of urgency with finalising its proposed changes to its pension fund Statement of Recommended Practice.
An FRC spokesperson told IPE: “We have received very positive responses with those FRS 102 preparers that will be affected by the amendment – namely financial institutions and users of their financial statements, highlighting the benefits it will bring.”
He added: “We are in the process of finalising the amendment, with the aim of issuing it in its final form in the first quarter of 2016.”
The decision ends a period of uncertainty for pension funds and their advisers as they attempt to finalise their first set of year-end scheme accounts for 2015 under the new UK GAAP regime.
Aon Hewitt consultant actuary Martin Lowes told IPE: “It’s reassuring to know they are expecting to proceed quickly. Knowing early that the changes will proceed will avoid a lot of unnecessary work on the part of preparers.
“It means, if you have two changes, you have to work out what you’re doing twice, and you end up having to restate for the prior year twice as well, in addition to getting your head around both changes.”
The FRC issued an exposure draft (ED) of its now finalised SORP in August 2014.
The ED proposed a number of changes to the 2007 version of the SORP.
The FRC’s decision to consolidate UK GAAP into a single accounting standard, FRS 102, was the driving force behind the need to update the SORP.
FRS 102 is a modified version of the International Financial Reporting Standard for Small and Medium-sized Entities.
It represents a root-and-branch reform of financial reporting in the UK and the Republic of Ireland.
Among the areas of accounting it addresses is accounting by pension funds. The SORP provides a layer of recommended practice on top of those requirements.
Since the last update to the SORP in 2007, the UK pensions landscape has seen both the introduction of auto-enrolment and a growing number of pension schemes entering the Pension Protection Fund.
The new SORP broadly addresses three areas of pension fund accounting.
It scraps the exemption that allowed pension schemes to report an annuity’s value at nil, it introduces a new valuation hierarchy based on IFRS 13, Fair-value Measurement, and it sets out new investment-risk disclosure requirements.
The FRC’s move will increase the pressure on scheme trustees to make sure they are able to comply with the new reporting requirements.
Towers Watson consultant Andrew Mandley said: “There are still some schemes that are not completely ready for this. It is important trustees be clear who is actually putting these new investment disclosures together.
“It would be easy to think someone else is doing it when in fact they are not. The qualitative disclosures link back to strategic decisions made by the scheme trustees, and the success of the exercise depends on relating the quantitative financial risk data to those decisions.”
He stressed that it would be a mistake for trustees to think they could leave everything to their investment managers.
Philip Briggs, audit director at RSM’s pensions group, painted a similar picture.
“The new investment disclosure requirements remain an area where I am not seeing pension scheme accountants producing many examples,” he said.
“Responsibility is being passed between pension scheme accountants and investment advisers, and this risks delays in providing draft disclosures for trustees to consider.”
Mandley added: “It seems as though some investment managers and custodians are being more helpful than others.
“Different providers will provide the necessary information in different formats, so there is still quite a task to compile this into a picture of the whole portfolio.”
Meanwhile, the Department for Work and Pensions has yet to finalise the outcome of its recently ended consultation on removing various pension-scheme disclosure requirements.
The disclosures were rendered largely redundant with the introduction of FRS 102.
Lowes said: “It is just a question of going ahead with the changes to the regulations sooner to avoid any overlap.
“I don’t think the extra information will add anything for the user. If anything, it will just confuse them.”