Current issues in pensions financial reporting - 31 December 2020

Published by Martin Hooper on

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  • Martin Hooper

    Martin Hooper

    Principal and Senior Consultant - Corporate Actuary

  • This note is for those who will be involved in preparing and auditing pension disclosures under Accounting Standards FRS102 (UK non-listed), IAS19 (EU listed) and ASC715 (US listed) as at 31 December 2020.

    We look at the current topical issues as well as the considerations for company directors when setting assumptions, and for auditors in determining whether the assumptions are appropriate. 

    Here are some of the key areas tackled in this report:

    • Discount rates fell by around 75bps over 2020 which will have increased accounting liabilities, and companies with 31 December 2020 year ends are likely to see higher deficits on their balance sheets.
    • For companies with a year end of 31 March, the temporary improvement seen in 2020 from higher corporate bonds yields will have evaporated. Companies with 31 March 2021 year ends will be looking at significantly higher deficits and should look to understand the extent of the potential impact in advance of the year end.
    • Companies will need to revisit the derivation of RPI and CPI inflation assumptions following the response to the consultation on changing the make-up of RPI.
    • The further judgement in the Lloyd’s Bank GMP equalisation case means companies will incur another P&L charge, although this is not expected to be as significant as the charge imposed from the first judgement in 2018.

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