This article deals primarily with the problem of accounting for the cost of defined-benefit pension schemes in the accounts of the sponsoring company (the employer). This is one of the most controversial issues currently being debated by accounting standard-setters, following the introduction of an innovative standard on the subject, FRS 17, by the UK Accounting Standards Board (ASB). This standard measured the pension-fund deficit or surplus as the difference between the current values of the pension-fund assets and liabilities, and the effects of changes in valuations were to be reported immediately in the Statement of Recognized Gains and Losses (STRGL). The introduction of FRS 17 coincided with: a sharp decline in stock-market prices; a reduction in the value of pension-fund investment; and a revision of actuarial tables to reflect the increased expectation of life, which increased pension-fund liabilities.
Rob Bauer, Roy P. M. M. Hoevenaars, and Tom Steenkamp
Market valuation of assets is a topic that has been discussed for quite some time now, but the valuation of pension contracts including all embedded options is a major challenge for pension fund policy makers. On top of that, pension fund beneficiaries are increasingly demanding more transparency with regard to the exact nature of their pension arrangement, or their pension deal. This article sheds some light on the management of the current and future financial health of a defined-benefit public pension fund. Most funds conduct a so-called Asset Liability Management (ALM) study that investigates the impact of decisions with regard to investment, contribution, and indexation policy on the various stakeholders of the fund (employees, employers, and retired and future generations).
Brad Potter and Naomi Soderstrom
Company stakeholders have unprecedented access to information about company activities and are looking beyond accounting reports for broader information to better assist their decisions (IIRC, 2011). Integrated reporting (IR) is a reporting framework promoted in recent years that aims to capture the broader social and environmental dimensions of company operations and report the information in meaningful ways. While the intuition behind IR is simple and attractive, debates relating to the practicalities of implementing this “new” form of reporting persist. We use the lens of research on financial and sustainability reporting to explore some challenges faced by IR. We examine a significant body of work conducted over the past three decades that has shaped our understanding of how company reports are interpreted and used. Based on this analysis, we offer insight into the challenges facing IR. These insights can be useful for informing the debate on implementation of this proposed reform.