The International Accounting Standards Board (ASB) has over the past two months published a number of new and revised International Financial Reporting Standards on consolidated accounts, fair values and pensions. The standards are required to be applied for years beginning on or after 1 January 2013 but are still subject to EU endorsement.
If endorsed, UK companies are likely to be particularly affected by the changes to the calculation of pension costs. Instead of crediting the expected return on pension plan assets separately and charging the calculated interest cost on the pension provision, the amended standard requires a charge or credit to be calculated by applying an AA rated bond interest rate to the net pension deficit or surplus. This is likely to reduce profit for many companies.
The new consolidation standard, IFRS 10, applies a single (revised) definition of control to all entities in determining whether they should be consolidated. While many groups will be unaffected the ASB considers that all parent companies will need to consider the possible implications arising from the standard, particularly where the original decision as to whether to consolidate a company was not clearcut.
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