Financial Reporting Standard 17 (FRS17) is likely to hit the headlines with increasing frequency over the coming months. It dictates how companies should reflect the cost of retirement benefits in their published accounts.
FRS17 is very prescriptive, leaving companies little room for manoeuvre. Its predecessor focused on achieving a ‘smooth’ pension cost in the profit & loss (P&L) account. The balance sheet simply mopped up the historical accumulation of differences between the pension cost and contributions paid, and became detached from reality. Moreover, the approach was open to manoeuvre and concealed the underlying risks to the sponsoring company.
