On Monday 18th February 2008 The Pension Regulator published a draft statement modifying its approach to looking at mortality assumptions within defined benefit pension schemes. The approach has been developed in light of emerging evidence coming primarily over the last year from recovery plans submitted to the Regulator. Read more »
Posts Tagged ‘Financial Reporting Standards 17’
There has undoubtedly been increased acceptance of the audit standard FRS17 over recent years although there is still a significant divergence in opinion about it ranging from it’s acceptance as being a necessary evil, it being viewed as a pain in the proverbials, or providing a useful measure of a potential liability. If nothing else at least it has given us a starting point when looking to measure pension liabilities between companies on a consistent basis – or has it!!! Read more »
Smoke and mirrors is a metaphor for, amongst other things, an insubstantial explanation or description. The source of the saying is based on magicians’ illusions, where magicians make objects appear or disappear by extending or retracting mirrors amid a confusing burst of smoke. The expression may have a connotation of virtuosity or cleverness in carrying out such a trick. Read more »
We’ve been being asked a lot recently to confirm in what circumstances charities and not for profit organisations with final salary pension funds need to provide full FRS17 disclosures in their company accounts.
The first requirement is to establish if the company is a “stand alone” scheme or is part of a “multi-employer” scheme. If the body has its own pension fund in which it is the only participating employer and which has separately identifiable assets and liabilities then there seems little doubt that full disclosure will now be required. Read more »
A rare audit qualification relating to FRS 17, the financial reporting standard on pensions, at the UK subsidiary of the US drugs group Merck, recently raised a few eyebrows within the accountancy and actuarial professions.
In the accounts, the auditor, PwC, qualified its report on the basis that they believed that the company had used an inappropriate discount rate in valuing the pension scheme liabilities. Rather than Merck’s discount rate of 6.0 per cent, PwC suggested that a more appropriate rate would have been in the range of 5.25 to 5.75 per cent. The auditor took the view that, in the absence of an actuarial calculation using a more appropriate discount factor, it was unable to quantify the extent of the understatement of the pension liabilities. Read more »
Jack Nicholson in ‘A Few Good Men’ famously said of Tom Cruise, ‘you can’t handle the truth’. Nicholson might not have had FRS17 in mind at the time, but his accusation could be made against those many companies, trade unions and pension advisers who clamoured to give voice to their disgruntlement over the recent introduction of accounting standard FRS17 – they detest it because they can’t handle the truth.
FRS17 was borne out of a need to address the predicament created by the then prevalent discounting of pension scheme liabilities, based on the erroneous assumption that equities would continue to deliver a healthy level of return for years ahead. Of course, as we now know, recent years have seen interest rates continue to fall while, simultaneously, the equity market suffered a marked slump. Read more »