Mercer has welcomed the EU endorsement of the revised International Accounting Standard 19, which covers accounting for employee benefits, including defined benefit (DB) pension plans (IAS 19R). The EU announcement was made on the 5th June 2012. The endorsement confirms that EU listed companies will have to adopt IAS 19R for accounting periods starting on or after 1 January 2013. On 14 June, Mercer is holding a Webinar on the impact of the revisions to IAS19 and the steps companies might need to consider taking as a result; interested parties can register here to attend.
The revisions to IAS 19 aim to make the treatment of pensions risk on a company’s balance sheet more transparent to investors, in the financial statements, by requiring immediate recognition of any under (or over) funded liabilities, and in the disclosures. Companies with schemes that impose relatively large liabilities on their balance sheets, and that have relatively high exposure to risk seeking assets, might find the footnotes to their financial statements get greater scrutiny by stakeholders seeking to understand what steps are being taken to mitigate the volatile effect on the company’s balance sheet. This may well prompt a wide-spread review of the risk management procedures applied to Defined Benefit (DB) pension schemes.
“We’re pleased that the EU has announced its endorsement of the new guidelines,” said Deborah Cooper, partner at Mercer. “In the context of unprecedented economic uncertainty across the Europe Union, companies with material exposure to defined benefit liabilities, and particularly those recognizing their net defined benefit liability for the first time, will need time to consider how to present their results to investors and analysts. Given the increased balance sheet volatility that will result, and other effects on reported profits, the new IAS 19 and the footnote disclosures may cause plan sponsors to re-evaluate their approach to DB plan risk management. The time to plan is now. Indeed, action may be required in the short term in relation to interim financial statements, particularly for those companies considering early adopting IAS 19R in 2012."
Mercer has previously highlighted the uncertain impact on European companies as well as five key themes that UK companies should be considering in advance of the new standard.
|
