UK accountants want ‘root & branch’ IAS19 reform
UK – The new international pension accounting standard IAS19 needs “root and branch” reform, says Eric Anstee, chief executive of the Institute of Chartered Accountants in England and Wales.
Anstee made the plea at a conference organised by the Society of Pension Consultants.
“Clearly, IAS 19 needs reform. The existence of optional accounting treatments is unacceptable, it creates confusion,” he told delegates.
The institute, however, welcomed the International Accounting Standards Board’s decision for IAS19 to allow the immediate recognition of all actuarial gain and losses in full via the Statement of Recognised Income Expenses.
Anstee said it was not a perfect solution, but said it was “necessary while we await the major project to reform IAS19 root and branch”.
He spoke of the differences between FRS17, which replaces the old accounting standard SSAP24 in the UK next year and the IAS19 standard, to which listed companies will have to conform.
Under FRS17, he explained, gains and losses are immediately recognised in full. “The institute strongly supports this approach,” he commented.
While under IAS19 gains and losses are taken through the profit and losses account, but recognition is not required. Recognition is mandatory only under certain circumstances through the ‘corridor deferral mechanism’.
“This deferred recognition results in amounts on the balance sheet that do not meet the definition of an asset or liability.”
He also mentioned that less than 10% of a 1,000-strong sample polled by the institute for a survey (which has not yet been published) mentioned FRS17 as a factor behind the closure of a defined benefit scheme.
The controversy over FRS17, Anstee said, was a “red herring”.
The ICAEW is to publish guidelines on the effect of FRS17 and IAS19 on realised profits and losses based on current UK law.