ASB postpones introduction of FRS17
UK- Companies will have more time to implement the accounting method FRS17 after the UK Accounting Standards Board (ASB) announced it was extending the compulsory December deadline.
The ASB’s proposal is a direct result of its International counterpart’s decision last week to reconsider the provisions of the international standard IAS19.
ASB Chairman Mary Keegan says: “We are proposing to defer the mandatory full adoption of FRS17 during the period of international discussions on IAS19, and when to consult on the early adoption in the UK of a standard based on whatever the International Accounting Standards Board (IASB) puts forward.”
UK funds were due to introduce FRS17 by the end of the year but they face the prospect of having to change again in 2005 when companies listed in the EU are obliged to apply international standards.
Chairman of the IASB Sir David Tweedie appears keen to use FRS17, which requires companies to report their pension fund’s assets at market value, as a framework.
But he is likely to come under pressure from the US where pension funds use a similar approach to IAS19, a system that produces less volatility in the value of a pension fund.
FRS17 has been criticised as being too short term and inappropriate for the long term nature of pension fund investment but Keegan says that the move does not reflect second thoughts about the approach.
“The board has confirmed that it considers the requirements of FRS17 to be superior to those of the present international standard,” she says.
The National Association of Pension Funds has welcomed the news. “It always seemed to us illogical to inflict on companies a new standard which could be obsolete within two years,” says chief executive Christine Farnish.
“FRS17 has already begun to damage occupational pensions by forcing companies to publish a snap shot picture of the funding levels of their pension schemes,” she says.
The Confederation of British Industry echoed the NAPF. Susan Anderson, director of human resources policy said: “It is good news that the ASB has taken early action so companies will not have two sets of changes to implement.
“But we still need to rethink the FRS17 standard which can give the impression of sudden hikes in pension scheme costs.”