The National Association of Pension Funds (NAPF) has been accused of misunderstanding what pension accounting is "trying to achieve", by BDO Investment Management.

In response to the NAPF's Accounting Summit, which will look at finding a better way to value pensions on balance sheets and ensuring the survival of defined benefit (DB) schemes, BDO Investment Management has taken issue with the body's claim that the current accounting standard, FRS17, "overstates the likely long-term costs of funding pensions".

John Broome Saunders, actuarial director at BDO Investment Management, explained: "The NAPF simply don't understand what pension accounting is trying to achieve. FRS17 has nothing to do with long-term funding. FRS17 is an attempt - albeit flawed - to bring the philosophy of fair value, mark-to-market valuation methodology to pension liabilities.

"On this basis, FRS17 typically understates the true 'fair value' of pension liabilities - which can only be objectively defined as the price at which at which the liabilities can be transferred to a third party. Placing any lower value on liabilities is simply an actuarial conjuring trick."

However, NAPF spokesperson, Mark Brooks, reiterated to Pensions Age the NAPF's belief that the standards must come under scrutiny. "We believe that the NAPF has got a reasonable grasp of the purpose of pensions accounting. The current standards are based on a mark-to-market philosophy, which is at best questionable when applied to long-term financial institutions such as pension funds.

"The standards are driving corporate behaviour, and pushing funds to purchase expensive government securities. We need to think again about both FRS 17 and IAS 19."

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