The International Accounting Standards Board's (IASB) proposals to remove the 'corridor' regime for employee benefits (IAS 19) in its Exposure Draft has opened a whole can of worms, with some companies reporting a possible increase in reported pension deficits of £25bn.

Hewitt Associates follows claims from Aon Consulting yesterday that the removal of this method would cause a £10bn increase in the pensions black hole.

FTSE 100 companies, the global human resources consulting and outsourcing company said, already have around £10bn of unrecognised losses which go on the balance sheet under the proposals. However, Hewitt said around £9bn of this is concentrated in just a few companies, so although it is not an issue for the majority, it will be a huge problem for those affected.

"The proposals in this exposure draft could put European companies - and particularly those in the UK - at a disadvantage compared to companies in the US where the changes are not being proposed for accounting standards," explained Martin Lowes, principal consultant at Hewitt Associates.

"UK companies will need to capitalise all future pension scheme expenses onto their balance sheets which could increase the reported deficit for FTSE350 companies by 20 per cent - equivalent to £15 billion. At the same time, the measures will also require the reporting of £10 billion of unrecognised losses in the FTSE100."

Lowes said the proposals could also speed up the exodus from equities, as companies will no longer be rewarded with higher profit disclosures for equity investments. "Indeed those who continue to hold equities will now need to disclose to investors the additional risks inherent in such a strategy," he said.

The change also means, Hewitt said, that companies that have already chosen to de-risk their pension fund investments will now have higher expected profits. Companies that choose to move out of equities will benefit from running lower risk in their schemes, while maintaining their disclosed profits from the pension fund.

"A change in investment attitudes could be good news for the security of pension scheme members' benefits but it would push up the already high cost of running a defined benefit scheme for companies - which could further accelerate the move for companies to cease to further accrual and to freeze their pension plans," Lowes concluded.

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