This contribution provides a short analysis of FRS 17. The Standard is about the accounts of the sponsoring corporation [company] (the employer). It is not about the accounts of the pension fund. Administrative costs of the fund and actual pension payments do not appear in the Standard.
The most important feature of the Standard is that it provides an itemized annual link between the opening and closing deficits/surpluses of a defined benefits fund, as measured using the market values of assets. In contrast, this link is rather vague in SNA. The actuarial value of the employer's/fund's outstanding liabilities to current and retired employees changes for other reasons than received contributions and property income: this is not entirely clear in SNA where this is recorded.
In the Standard, the "Movement in surplus [/deficit] during the year", as attributed to the employer, is analyzed in the following way (see the Appendix 1 of FRS 17):1a. Current service cost
1b. Past service cost
1c. less Contributions (total, less employees' contributions)
2. Other finance income
3. Actuarial gain [/loss]
"Current service cost" is net of employee contributions and is to be included within operating profit within the profit and loss account. It will differ from employer contributions in a number of circumstances, as "current service cost" relates to current service only, not to the elimination of a deficit.
The difference between the actual and the expected return on assets appears as part of the "Actuarial gain [or loss]" is analyzed in another Table called "Analysis of the amount recognized in the statement of total recognized gains and losses", which appears to have similarities with the complex of `financial' accounts in SNA. The actual property income of the fund [its investment income excluding net capital gains] appear in the employer's accounts, in total, only as part of a reconciliation item.
John Walton is a UK based consultant. He worked with Eurostat (Unit B.1 and D.2).
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