An FRC spokesperson told Investment & Pensions Europe (IPE): “We have received very positive responses with those FRS 102 preparers that will be affected by the amendment – namely financial institutions and users of their financial statements, highlighting the benefits it will bring.”
He added: “We are in the process of finalising the amendment, with the aim of issuing it in its final form in the first quarter of 2016.”
The decision ends a period of uncertainty for pension funds and their advisers as they attempt to finalise their first set of year-end scheme accounts for 2015 under the new UK GAAP regime.
The FRC issued an exposure draft (ED) of its now finalised SORP in August 2014. The ED proposed a number of changes to the 2007 version of the SORP. The FRC’s decision to consolidate UK GAAP into a single accounting standard, FRS 102, was the driving force behind the need to update the SORP.
FRS 102 is a modified version of the International Financial Reporting Standard for Small and Medium-sized Entities. It represents a root-and-branch reform of financial reporting in the UK and the Republic of Ireland.
Among the areas of accounting it addresses is accounting by pension funds. The SORP provides a layer of recommended practice on top of those requirements.
Since the last update to the SORP in 2007, the UK pensions landscape has seen both the introduction of auto-enrolment and a growing number of pension schemes entering the Pension Protection Fund.
The new SORP broadly addresses three areas of pension fund accounting. It scraps the exemption that allowed pension schemes to report an annuity’s value at nil, it introduces a new valuation hierarchy based on IFRS 13, Fair-value Measurement, and it sets out new investment-risk disclosure requirements.
The FRC’s move will increase the pressure on scheme trustees to make sure they are able to comply with the new reporting requirements.
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