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FRC proposes clarification of pensions accounting under FRS 102

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20 Aug 2014

The Financial Reporting Council (FRC) has today published Financial Reporting Exposure Draft (FRED) 55 'Draft Amendments to FRS 102 – Pension Obligations'. The draft amendments seek to clarify issues relating to accounting for defined benefit pension plans under FRS 102. Comments are invited by the FRC by 21 November 2014.

The proposed amendments clarify that entities reporting under FRS 102 should measure their obligations using the projected unit credit method and should not recognise additional liabilities to reflect funding valuations or agreements to fund deficits. Entities would therefore not need to recognise additional liabilities for a schedule of contributions, even if such an agreement would otherwise be considered onerous. This contrasts with the position for companies reporting under IFRSs, which may have to recognise an additional liability for such obligations in some circumstances.

The draft amendments also propose to clarify that remeasurements recognised in other comprehensive income include movements in irrecoverable surpluses, i.e. movements in those scheme surpluses that are not recognised as assets.

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