Pensions differences
4 Aug 08
Fundamental differences of opinion among ICAS members suggest that it may be very dif?cult to arrive at a ?nancial reporting standard on pensions that satis?es all stakeholders
That is ICAS’s verdict in its submission to the Accounting Standards Board (ASB) on its paper The Financial Reporting of Pensions.
The Institute’s response reflects conflicting views of its members. One area of debate concerns whether pensions accounting should come under the conceptual framework applying to other entities, or whether the long-term nature of pension schemes means that applying the general framework results in a short-termist perspective.Linked to this is the
argument as to whether pension scheme assets should be measured at current values, or at the higher of net realisable value and “value in use”.
One school of thought argues that the application of a “risk-free” discount rate, as proposed by the ASB, would significantly increase reported liabilities without reflecting economic reality. Those more comfortable with the proposal, ICAS says, still felt it requires a more thorough justification.
There was little consensus on whether liability to future benefits should be reflected in scheme financial statements.
ICAS noted its gratitude to the ASB’s director of research, Andrew Lennard, for meeting ICAS members at two events, during the consultation.