Current issues in pensions financial reporting Q4 2022

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 December 2022. 

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 2022. Most pension schemes have likely seen a significant fall in the value of their IAS19 liabilities. Although this is positive news, most asset classes lost value over the year, limiting the benefit to the corporate balance sheet. 
• Net impact on corporate balance sheet mixed. Those schemes with high levels of interest rate hedging are unlikely to have seen any improvement in balance sheet position, but those with low levels of hedging may have seen big gains. 
• Impact of Covid-19 on demographics is unlikely to reduce liabilities. The CMI estimates there have been 150,000 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