FRS17 requires that pension assets must be accounted for at market price, and liabilities discounted by the yield on corporate bonds. A shortfall or surplus must be reflected on the company’s balance sheet.
Industry officials have insisted in recent months that FRS17 effectively renders many pension plans underfunded and will likely prompt many companies to drop traditional pension arrangements. (See FRS17 Hits UK Balance Sheets )
If the ASB delays FRS17’s implementation, it would issue new pension accounting guidelines based on precedent set by the International Accounting Standards Board (IASB). IASB’s standards are due in 2003.
However, Sir David Tweedie, IASB chairman, appears determined to use FRS17 as his model.
Mary Keegan, ASB chairman, denied the delay plans had been prompted by lobbying from companies. “We continue to believe FRS17 is the right standard and it is the one the IASB should adopt,” she said.
The existing international accounting standard on
pensions, known as IAS 19, is preferred by some companies
because it makes their financial statements less volatile.