Current issues in pensions financial reporting Q1 2023

This briefing note is for those involved in preparing and auditing pension disclosures under Accounting Standards FRS102 (UK non-listed), IAS19 (EU listed) and ASC715 (US listed) as at 31 March 2023.

It covers 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.

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Key insights

• IAS19 liabilities in big fall over last 12 months. Since 31 March 2022, most schemes have likely seen a significant fall in the value of their IAS19 liabilities, with corporate bond yields generally rising by around 2% p.a.
• Surpluses. Improvements in funding levels mean many schemes may find themselves with accounting surplus at the next balance sheet date, possibly for the first time under the current versions of the accounting standards. 
• Impact of Covid-19 on demographics is unlikely to reduce liabilities. The CMI estimates there have been 171,000 more deaths than would have been expected since the start of the pandemic, but this is unlikely to significantly reduce pension scheme liabilities. 

Further topics featured include:

• IAS19 disclosure requirements
• Setting discount rates under the accounting standards
• Inflation based on RPI and CPI
• Mortality assumptions