New accounting standards 'could increase pension deficits'

News Article - 04 January 2008
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New accountancy rules could mean many pension schemes will fall into deficit, it has been claimed.

Pension Capital Strategies, a risk advisory firm, has warned that the introduction of IFRIC 14 on January 1st will mean businesses may either not be allowed to recognise pension surpluses or must recognise larger pension deficits in their accounts.

The firm explained that this may lead to some companies, whose trustees have more power, deliberately under funding pension schemes.

Charles Cowling, managing director, of the firm, said: "In my experience, as many as a quarter of scheme trustees have got pretty strong powers - often more than the company is comfortable with - so it could affect a fairly large number of schemes."

Mr Cowling added that the exact impact of the new standards would not be felt until companies issued financial reports later this year.

IFRIC 14 was issued by the International Accounting Standards Board in July 2007 and aims to standardise the practice of recognising assets in relation to a surplus.

Article keywords: Proposed changes to the International Federation of Accountants' (IFAC) Code of Ethics for Professional Accountants could change the guide from a &quot;conceptual framework&quot; to a more &quot;rules-based approach&quot;, it has been claimed.<br/><br/>The Chartered Institute of Management Accountants (CIMA) has responded to IFAC's suggested changes to the code, stating that in addition to changing the guide's approach, amendments could cause the code to become less user-friendly.<br/><br/>&quot;By including certain amendments to the code, CIMA believes there is a risk that a more authoritarian approach along with an increase in detail and length could render the code less effective as a tool for guiding professional behaviour, &quot; said Robin Vaughan, director of professional standards at CIMA.<br/><br/>He stressed however that the institute firmly supported the ethical code and was a champion of principles-based approach towards such guidance.<br/><br/>The federation is currently calling for comments on international standard on auditing 200 &#150; Overall Objective of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing.<br/>

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