ASB Submits Proposals on Change in Inflation Measures for Pensions

Jack Humphrey, Regulatory journalist
October 14, 2010 /

The ASB (Accounting Standards Board) has invited comments on a proposed Urgent Issues Task Force (UITF) abstract which will look at the accounting implications of changes in the inflation measures the government uses to calculate pension increases.

In July this year, the government had decided that it would be using the Consumer Prices Index (CPI) for the determination of the minimum pension increases to be applied to the statutory index-linked features of retirement benefits as the right inflation measure.

This is different from what the government had used previously, namely the Retail Prices Index (RPI).

In November this year, the next such annual inflation measure may be expected to be announced by the government.

The draft abstract as submitted by the ASB, has proposed that in case there is a change in the obligation to the member, he or she will get a benefit change which is again accounted for as a past service cost.

Where the obligation to the member remains the same, a change in the liabilities of the scheme arise from a change in the assumptions applied to measure those liabilities.

The draft abstract further states that: “The key to the accounting is whether there is a change in the members’ obligation.”

The UITF further noted that businesses which apply paragraphs 10 to 12 of International Accounting Standard 8, Accounting Policies, Changes in Accounting Estimates and Errors, should look up the current draft abstract as a sort of a reference as well as a source of guidance for the development of an accounting policy.

Comments can be sent to the UITF on any of the aspects of the draft abstract. Comments can be sent to asbcommentletters@frc-asb.org.uk. Comments can be sent till November 10, 2010.

 

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