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Penalty zone.

Document Cited in Related
Vincent
AuthorPotter, Bernard
PositionLetters - Letter to the editor

Your news item "Pension penalty" (First in, October) indicates how accounting standards that apply to pension schemes seem to have a misleading and, sometimes, damaging effect on company accounts without providing any benefit either to shareholders or--a more important factor to me--to members of occupational pension schemes.

As I understand it, FRS17 requires companies to value their pension scheme assets as if they were all in class-A bonds. This has actually influenced the investment policy of some schemes, which is surely not what accounting standards are about.

Now we learn that IAS19, when combined with IFRIC14, could cause Alliance Boots to take a 418m [pounds sterling] "hit" on its balance sheet. (I'm not sure what the opposite entry on the balance sheet would be.) Surely there is something wrong with the logic of our standard-setters, one of which is presumably our own institute?

Has CIMA, or any of its members who may be experts in this field, any comment to make? As far as members of pension funds are concerned, the only sensible way to value a fund properly is at a buy-out valuation.

Bernard Potter FCMA

Secretary of the Royal Ordnance Pension

Scheme and treasurer of the Occupational

Pensioner's Alliance

CIMA's response:

The institute published "The pension liability--managing the corporate risk" (www.cimaglobal.com/pensions) under the...

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