GLOBAL - The International Accounting Standards Board (IASB) has moved to reassure constituents its pensions accounting project has adequate staffing following the departure last week of project team member Jenny Lee.

IASB director Alan Teixeira told IPE: "Although we will miss Jenny, we have a new staff member moving onto the project next month. I am confident that the project will remain fully resourced."
 
A statement from the IASB director follows questions from IPE on whether Lee's departure on 19 September would force it to cut its losses and converge the balance sheet under International Financial Reporting Standards with US GAAP.

IPE has also sought clarification from the board that it will work with national standard-setting bodies to ensure moves to update the pensions accounting standard, IAS 19, meet the needs of the jurisdictions applying IFRS.

Teixeira continued: "We have been consulting with the DRSC [Germany's national standard setter] and a wide range of constituents in Belgium, Netherlands and Switzerland. We expect to continue to work with the DRSC and maintain an open dialogue as we develop any proposals."

News of these latest developments emerged at the same time as the board's German constituents published its response to the pensions accounting review, and which largely panned the board's proposals as operationally unworkable and conceptually flawed.

In an unusually sharply-worded critique, the President of the German Accounting Standards Board, Liesl Knorr, has called on the board to "abandon the proposed distinction between CB and DB promises."

In a 24 September comment letter to the board, Knorr wrote: "As already communicated to members of the IASB, the clear majority of German post-employment benefit plans would no longer be classified as defined benefit but rather as contribution-based promises."

The result for German plan sponsors, Knorr concluded, is "the expected distribution between CB and DB promises under the proposed definitions would lie between 70% CB and 30% DB - from previously 30% DC and 70% DB - in Germany."

The board's proposals, she argued, "do not achieve [their] goal because they solve one problem at the expense of opening a greater number of other unresolved issues that - as explained above - will be difficult to solve in practice, are conceptually impure and costly to implement".

IASB unveiled a discussion paper in March proposing, among other changes, changes to pensions accounting requirements and a new definition of contribution-based pension plans.

The IASB said it wants the new plan classification to improve the accounting for what it has dubbed "troublesome" cash-balance-type plans.

The board has divided its work on pensions into two phases. After completion of Phase I, which should result in improvements to IAS 19 by 2011, the board has said it hopes to work with the FASB to mount a full-scale review of pensions accounting.

Embarrassingly for the IASB, consultancy Aon has warned the proposed contribution-based definition fails to snag Belgium's so-called troublesome plans.

In a comment letter to the board published today, Aon's Régis Renard, a member of the board's own pensions advisory working group, wrote: "The proposal does not fully achieve its goal: it does not solve some issues that it should (such as the Belgian problematic [plans]) and creates unnecessary issues in some other situations."

The Aon letter leaves the IASB facing tough questions over its management of the pensions project.

IPE can reveal IASB members in fact received an in-depth education session on the accounting issues facing Dutch, Belgian and Swiss pensions at their October 2006 board meeting.

The session featured a 42-page presentation on Belgian intermediate-risk plans from Deloitte actuary Geert de Ridder.

The Dutch Accounting Standards Board has meanwhile warned the IASB that "the impact of the proposed amendments to the definitions are very difficult to understand and not very clear".

The Dutch submission continued: "Furthermore, the discussion paper does not provide sufficient guidance for the accounting of plans that are common in the Netherlands."

It concluded: "We are unable to answer [Question 6], as the new definitions are not very clear. We do not recognise the plans commonly used in the Netherlands in the examples provided and, as a consequence, all existing plans would have to be assessed again."

In a separate move, healthcare and diagnostics concern Roche has slammed the IASB - in a public letter addressing proposals to create a so-called monitoring group to oversee the IASB's parent organisation, the International Accounting Standards Committee Foundation - for its ability to engage its constituents.

Any new monitoring group, Roche argued, "would need to be aggressively critical" where the board receives "overwhelmingly negative comments to a proposal but nevertheless presses ahead with it with the argument that the feedback did not bring to light any new arguments not previously considered or that the commentators obviously had not understood the proposal".

Roche has also called for IASB members to be able to demonstrate what it calls "practical experience".

The letter, signed by Dr. Erwin Schneider, the concern's corporate finance chief, qualifies the Roche experience criterion as "at least five years' recent experience of actually preparing, using and front-line auditing of financial reporting."

Practical experience "limited to the lecture hall and the technical desk does not automatically do so," the letter's authors concluded.

A sound recording of the October 2006 education session is available at http://media.iasb.org/Post%20Employment%20benefits16%20October.mp3

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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