Adoption of IAS 19 by Europe's Premier Listed Companies
ACCA research report 100 is published
05 Sep 2008
Adoption of IAS 19 by Europe's Premier Listed Companies by Jan D Fasshauer, Martin Glaum and Donna L Street has been published as ACCA research report number 100.
The report, an in-depth analysis and evaluation of defined-benefit pension plan disclosures provided in 2005, offers some insight into the factors affecting policy choices and the impact of using the new IAS 19 full-recognition option in contrast to the traditional 'corridor approach'.
Among the report's findings are:
- the financial statement impact of using different methods for the recognition of actuarial gains and losses, which the IASB considers undesirable, is frequently material, particularly from a balance sheet perspective
- there is a lack of financial statement comparability for companies with material defined-benefit pension plans, stemming from the flexibility allowed under IAS 19
- IAS 19 enables some European companies to achieve material amounts of off-balance sheet financing by using the 'corridor approach'; sampled companies using this method were found to be overstating equity by 3.43% on average and understating recognised net pension liability on average by 41.02%.
Adoption of IAS 19 by Europe's Premier Listed Companies recommends that the IASB should proceed with its proposal to eliminate the 'corridor approach' and require full recognition of actuarial gains and losses. This would ensure IAS 19 is consistent with the Financial Accounting Standards Board's SFAS 158, thereby enhancing international compatibility.