EFRAG and European national standard-setters publish Financial Reporting of Pensions - feedback and redeliberations
02 December 2009
The financial crisis has refocused attention on the need for financial reporting. The draft paper stimulates discussion on the principles that might be reflected in future accounting standards on employment-related pension benefits.
The objective of the DP (Draft Paper) is to take a fresh look at – and stimulate discussion on – the principles that might be reflected in future accounting standards for employment-related pension benefits.
Since embarking on this research project in October 2005, the recent financial crisis has refocused attention on the need for financial reporting to provide users of financial statements with an understanding of the risks to which an entity is exposed. Since 2005, pensions have been affected by:
(i) an increase in the number of defined benefit schemes closing to both new entrants and to future accruals in the UK. As a consequence, the provision of defined benefit pensions is often no longer part of a wider human resource strategy to retain and recruit staff by employers. The main focus for many entities is now on risk management and funding the pension plan. It is the finance departments which take a more active role in the management of the pension plan.
(ii) the UK AA corporate bond rate used to discount pension liabilities moving away from the underlying gilt rate and, for a period of time, reducing the level of reported liabilities and causing the funding position of many pension plans to appear stronger than the underlying economic reality.
(iii) the strengthening of European legislation regarding management and scheme funding.
© EFRAG - European Financial Reporting Advisory Group
