GLOBAL -- The International Accounting Standards Board (IASB) has amended the international pension cost standard IAS 19 to bring it into line with the UK retirement benefits standard FRS 17.

The aim is to enable UK and Irish companies to continue to recognise changes in the value of their benefit plans immediately, rather than over a long period.

Until now, IAS 19 has required companies to recognise actuarial gains in profit and loss, either in the period in which they occur or spread over the service life of their employees.

FRS 17 requires gains and losses to be recognised in the period in which they occur. However, this can be done outside profit and loss, through a statement of recognised gains and losses.

The IASB has now added the option of going outside the profit and loss account to the IAS19 standard. The amended standard gives companies the option of recognising actuarial gains and losses in full in the period in which they occur, outside profit or loss, in a separate statement of recognised income and expense

Sir David Tweedie, IASB chairman, said the aim was to create greater transparency in pension cost accounting: “The amendment today allows entities to choose a simpler more transparent method of accounting than is commonly adopted at present. I hope that many entities will take the opportunity of improving their financial reporting this way.”

Consultants Watson Wyatt described the amendment as a “stop-gap measure” to accommodate UK and Irish companies who have already adopted or disclosed results on the FRS 17. “It permits them to continue on essentially the same approach.

The firm commented: “While IAS 19 has always permitted the immediate recognition of gains and losses, until now this would have required them taking them through the headline profit and loss account each year. This has not been a popular approach given the volatility of the P & L account that would arise.

“The IASB is not in favour of the ability to spread gains and losses and seems to have felt that not introducing this option would have pushed some UK and Irish companies to revert to an approach that it regards as inferior to the FRS 17 approach.”

The amended IAS 19 is a final standard from the IASB. Its adoption by lasted European companies depends on approval by the EU. This is expected to take between six and nine months.

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