Posted by Brian Marks on 06 November 2001 at 20:02:47:
In Reply to: FRS17 Accounting Standard posted by Soon to retire on 30 October 2001 at 09:21:02:
I don't know if it counts as knowing more, but here is one summary of FRS17.
"Broadly, the changes introduced by FRS17 are:
Both the assets and
liabilities of pension arrangements are 'marked to market' and the net position
included on the organisation's balance sheet, subject to adjustments for
deferred taxation.
From year to year, changes in this net position are
recognised immediately in the balance sheet.
The expected cost of the next
year's benefit accrual will be charged against operating profit, with the
interest on the value of the accrued benefits less the expected return from any
invested assets included in the financing costs. Furthermore, the full costs
associated with any benefit improvements and the benefit aspects of any company
reorganisations (settlements/curtailments) will be charged against the current
year's profits.
The various differences between the actual and expected
costs associated with retirement benefit provision will emerge in the Statement
of Recognised Gains and Losses - the STRGL."
That seems to match what "Soon to retire" says, but I don't think we need worry about it leading to IBM funding itself from our reserves any faster - they are already doing it as fast as possible. (Our benefits are so poor that the Inland Revenue would not allow any extra payment to IBM).
FRS17 will have some effects, such as Boots decision to pull out of equities. People think that was because:
"Balance sheet volatility could be reduced by arranging for the asset and liability figures to move more in sympathy with each other. This could be achieved by increasing the proportion of pension scheme assets invested in corporate bonds."
FRS17 will make us more like the Americans, where adjustment to the actuarial
assumptions like expected returns and longevity will become another tool to be
used in the financial engineering of company accounts.