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FRC publishes amendments to clarify pensions accounting under FRS 102

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27 Feb 2015

The Financial Reporting Council (FRC) has today published ‘Amendments to FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ – pension obligations’. The amendments clarify aspects of the accounting for defined benefit pension plans under FRS 102.

The amendments, which  are effective for accounting periods beginning on or after 1 January 2015, 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 but would need to disclose the future payments to fund a deficit that have been committed.  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 amendments also clarify that the effect of not recognising an irrecoverable surplus in a defined benefit plan is shown in other comprehensive income, rather than profit or loss.

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