S&P bemoans European pension disclosure

EUROPE - Many top European companies are not consistently disclosing their assumptions on future increases in pensionable earnings, says Standard & Poor’s.

“Although Europe's corporate issuers have to a degree improved their postretirement liabilities reporting in the past 12 months, many blue chip companies are still not consistently disclosing their assumptions on future increases in pensionable earnings,” the ratings agency said.

And it said that too many companies still do not disclose other actuarial assumptions, pension fund breakdown by asset classes, or non-pension obligations.

“Companies that regularly disclose assumptions seemed to be slightly more conservative at year-end 2002 compared with year-end 2001,” it said.

It said it focuses on the projected benefit obligation as its main tool for assessing pension liabilities, instead of the accumulated benefit obligation method. It said the PBO is “the fullest measure of the liability”. The PBO, according to S&P, “values the pension promise at the amount for which it will ultimately be settled”.

“A surprising number of blue chip credits, particularly in continental Europe, do not clearly report projected benefit obligations," said Emmanuel Dubois-Pelerin, credit analyst and director of Standard & Poor's Corporate Ratings Europe.

"Nevertheless, the most glaring omission is that of actuarial assumptions and the lack of pension information with respect to merger and acquisitions activity."

S&P has found that as at the end of 2002, less than one company in 10 remained in pensions surplus.

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