UK - The Accounting Standards Board is seeking to amend the FRS17 pensions accounting standard to bring it in line with the international IAS19 measure.
The board has issued for comment a ‘Financial Reporting Exposure Draft’ setting out its proposals on FRS17.
“The ASB has been reviewing the disclosures for defined benefit schemes in the light of concerns expressed by commentators that financial statements do not contain sufficient information to allow their users to adequately assess the risks arising from defined benefit schemes,” the ASB said.
It added it also took into consideration the “significant changes that have been made to the UK regulatory regime for pensions since FRS17 was developed”.
There’s a draft reporting statement which aims to complement the disclosures proposed in the amendment to FRS 17.
It sets out six principles for providing disclosures for defined benefit schemes.
- relationship between entity and trustees
- main assumptions used to measure liabilities
- sensitivity of scheme liabilities to changes in assumptions
- how liabilities are measured
- future funding requirements
- nature and extent of the risks from assets
“The ASB is of the view that a reporting statement setting out principles for disclosures, rather than specific requirements, should provide entities with the flexibility to make disclosures that are appropriate to the risks and rewards that the entity is exposed to in relation to defined benefit schemes.”
The board proposes the changes should be effective for accounting periods ending on or after 31 December 2006 – with comments by September 11.
Elsewhere, consulting firm Punter Southall has said it does not expect the launch of new bulk annuities firms like Paternoster to result in lower prices.
“Trustees of pension schemes in winding-up who are required to purchase annuities will welcome the new entrants to the bulk annuity market as it will give them more options,” Punter said.
“However we do not expect significant savings to arise although smaller schemes may get a more pro-active service than is currently available in the market.”
The market was unlikely to expand from the current “forced buyers” to include companies voluntarily paying a very significant premium to mitigate their pension risks.