| KPMG says FRS 17 reprieve "good for business" |
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| 04/07/2002 | |
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by Nat Mankelow Professional services group KPMG has welcomed the temporary reprieve from FRS 17 accounting standard saying it represented good news for UK business. Recent research by KPMG pensions found that 40 per cent of the companies interviewed, cited the impending introduction of FR17 and its expected impact on company balance sheets, as a major concern. Pensions are costing business 15 per cent or more of payroll – and costs year-on-year have become more volatile, says the professional services firm. According to KPMG, the recent substantial falls in international and UK stock markets following WorldCom would have resulted in a further deterioration of an already troubled final salary pensions funding position. From disclosures already made under FRS 17, the impact that the standard has had on the sponsoring company's share price has been clearly observed. Full implementation of FRS 17 – which requires companies to place the surplus or deficit revealed under FRS 17 on the balance sheet – is likely to have resulted in some companies struggling to pay dividends at this current time. However, on a longer-term view, most EU-listed companies must apply international accounting standards from 2005. KPMG's pensions clients regard deferral of the FRS 17 as good news. "Both employers and employees will benefits from this reprieve – a breathing space is a good thing," says pensions partner David Fairs. "In current economic conditions the funding position under the FRS 17 looks particularly poor. Forcing companies to take a snapshot view of their solvency position in these circumstances is likely to give an overly pessimistic view of the company's financial commitment to their pension fund. Deferral of full adoption of the standard may mean some companies will reconsider closing their final salary schemes – particularly whilst they await the outcome of the simplification review being undertaken by Alan Pickering." |
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