The International Accounting Standards Board (IASB) has announced that it will be looking to remove the ability to defer the recognition of gains and losses on company balance sheets, in its Conceptual Framework for Financial Reporting: The Reporting Entity draft paper, which is due for publication in the next few weeks.

Also known as the 'corridor' method, Stephen Cooper, IASB board member, explained to delegates at the National Association of Pension Funds' (NAPF) Investment Conference in Edinburgh, that being able to effectively hide unwanted statistics should no longer be permissible.

"We have seen companies with pension fund deficits but having assets as previous funding carried forward," he said, which he said could be misleading. "The change means we will have immediate recognition of changes in assets and liabilities."

He was quick to point out however, that the IASB was not proposing any immediate changes to the measurement of pension schemes' assets.
"Later this year we will be making changes and the long-term review of measurement of pensions accounting will be a part of that," he said.
Cooper's comments followed those made by NAPF chair Lindsay Tomlinson. He called for a change to the accounting rules, saying they have a "disproportionate effect on pensions".

"I believe that the ASB and IASB are heavily influenced by the wisdom that markets know best," he said, when debating whether fair value accounting is suitable for pension schemes.

He said mark to market, or fair value accounting, is not necessarily the best idea for long-term funds.

"We need actuarial smoothing," he said. "We need to throw some grit in the works to prevent a mis-application of capital. The ASB and IASB, please think again: you are allowed to do so."

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