UK – The UK’s Accounting Standards Board says it is undergoing a project to “reconsider the fundamental principles of pensions accounting”.

The board has provided an update on its Research Project into Accounting for Pensions, outlining the questions that will be addressed. These will include:

• how is the relationship between an employer and a pension scheme best reflected in the employer’s financial statements?
• how should the employer’s liability in respect of pensions be quantified (actuarial method, liability/future salary increases, discount rate)?
• what is ‘the expected return on assets’?
• what is the impact on financial reporting of the PPF levy?
• are the disclosures required by current standards appropriate?

“The research will also cover the financial reports of pension schemes, including consideration of whether requirements for the accounts of pension schemes secure adequate reporting of liabilities to pay pensions,” the ASB said.

The project was launched in October last year and comes as significant regulatory and legal have changed the environment for the FRS17 standard.

The ASB has formed a Pensions Advisory Panel chaired by its technical director Andrew Lennard. It is expected that the research will be published in the course of 2006.

Meanwhile, the Financial Reporting Council has confirmed the funding arrangements for 2006/07 for its responsibilities for actuarial standards and regulation.

Pension schemes will have to pay £765,000 towards these costs, it said.