FRS 17 will hit UK plc balance sheets

Furthermore, one in ten companies will see a fifth of their asset value wiped out under the new rule, according to an estimate undertaken by consultants William M. Mercer.

Fifty-two percent of companies are anticipating a decline in their assets, compared to just 28% last year, according to data modelled from a sample of 50 companies selected from the top 500 plcs in the UK.

Last year, none of the companies surveyed predicted an asset fall of more than 20%.

'A year ago, FRS 17 would have produced a healthier balance sheet for the majority of companies in spite of a year of falling markets. But the situation is different now - pension fund assets fell again by an average of 10% in 2001,' said Tim Keogh, European partner at Mercer.

Keogh said the full impact of the standard would depend on the size of the pension fund relative to the company's capital.

'Many companies are starting to review their exposure to financial risks from their pension fund - especially if these could hit their balance sheet in a big way,' he added.