UK Employer Group Opposes FRS17

April 2, 2002 ( - Another UK employer group has come out in opposition to Financial Reporting Standard 17 (FRS17), the new UK accounting regulation on how companies must account for their final salary pension plan liabilities, slated for full implementation next June.

FRS17 requires that companies give an annual statement of their pension plan, as opposed to the former SSAP24 guidance, which made it more difficult for outsiders to gauge the health of a pension plan.

FRS17 does not require that companies keep their plans fully funded all the time – they need merely comply with the government’s Minimum Funding Requirement.

CBI View

The UK’s Confederation of British Industry (CBI) wants FRS17, which requires that firms include pension liabilities on their balance sheets, amended to allow firms to base the valuation of pension assets on their average market value over a three-year time period.

The claim that the new standard results in an unfair reflection of the plan’s health, especially during bear market years.

The CBI believes that the new standard is leading to an increase in the number of companies moving away from defined benefit plans, and may encourage fund trustees to adopt short-term performance measurements.

While the CBI concedes that users of company accounts should have access to transparent information, FRS17 is misleading and introduces a degree of volatility into company accounts that fails to reflect the realities of pension fund financing.

Tax Rules

In related news, the CBI called for changes to tax rules allowing employees over retirement age, to continue working part-time, while receiving a partial company pension.

The CBI is an independent business organization, which seeks to ensure that the UK government, the European Commission and the community understand the needs of British business.

Founded in 1965, the CBI is a non-profit organization funded by the subscriptions paid by its members.