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The Accounting
Standards Board (ASB) has claimed to be “delighted”
with the quantity and quality of the responses it has received to
its discussion paper, The Financial Reporting of Pensions
despite it receiving a large amount of negative feedback.
The paper, which was issued in January 2008, had the aim of stimulating
debate and influencing international opinion on the reporting of
pensions. The document has struggled however to find support in
many areas of the pensions industry.
Mercer has led the criticism of the ASB with the consultancy firm
labelling the proposals in the paper as “misleading and impractical”.
Phil Turner, chairman of Mercer’s global accounting group
said that the existing approach to presenting pension expense was
“perfectly reasonable”, at least until the current financial
statement presentation project was complete, and “an informed
analysis of how pension gains and losses relate to other items in
the new income statement” could be made.
Punter Southall expressed concern at the use of risk-free rate in
the accounting proposals, as this could increase the liabilities
of the FTSE 350 by £250bn. As an alternative to the risk-free
basis in the paper, the consultant actuaries proposed disclosure
on the basis used for Scheme Specific Funding, which it says reflects
the reality of the company’s obligations to contribute to
the pension scheme and is relatively easy to produce.
The National Association of Pension Funds (NAPF) also warned that
the proposals could lead to the erosion of UK defined benefit (DB)
pension schemes. Joanne Segars, NAPF chief executive, commented:
“These proposals are likely to further erode and weaken defined
benefit provision in the UK, increasing reported scheme liabilities
and undermining scheme sponsors’ willingness to provide these
types of pensions. It is the practical effect that is at the heart
of our concerns.”
- Pensions Age
July 2008
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