The International Accounting Standards Board (IASB) voted unanimously earlier this month to add a two-phase review of pensions accounting to its agenda.
During phase one of its review of IAS 19, the London-based standard setter will tackle smoothing, cash-balance plans and, thirdly, plan settlements and curtailments – over a four-year timeframe.
Introducing the project plan, IASB director of research, Wayne Upton, said the objective was to address issues that “could be handled in a four-year horizon”, and which would “result in an improvement in financial reporting”.
The decision to tackle smoothing – used to reduce volatility of pensions obligations on the balance sheet and in the income statement – may prove controversial.
“The first thing to consider is whether financial reporting could be improved by eliminating smoothing,” said Mr Upton, who added that it was not a key element of pensions accounting.
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