THE BODY responsible for setting international financial reporting standards (IFRS) is considering a radical shake-up of pensions accounting with big implications for finance directors with defined benefit and defined contribution schemes.
The International Accounting Standards Board (IASB) recently launched research project on pensions accounting is focused on measurement, despite its latest amendments to accounting for pension liabilities coming into force only two years ago.
The project is focused on measurement, in particular on the measurement challenges that arise from hybrid pension schemes that do not fall into defined contribution (DC) and defined benefit (DB) categories in IAS 19.
According to Stephen Cooper, an IASB board member at the IFRS Foundation, which oversees the work of the IASB, it is ‘necessary’ to reconsider aspects of pension accounting.
Writing in Financial Director, Cooper said “it may be worth considering the measurement of pension schemes more widely, to identify a measurement basis that works for all types”.
Cooper also raised the question of whether developing a model that covers the full spectrum of schemes might result in the standard setter changing the requirements for DB schemes.
“We need to address issues that have arisen in practice, such as the problems of determining the high-quality bond yield. These need to be considered in developing a coherent measurement basis that can meet the needs for reporting all schemes,” he said.