Mcnally, Bridget (2017) IAS 19 valuations for DB Schemes – true or fair? Working Paper. National University of Ireland Maynooth. (Unpublished)

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Abstract

Purpose - This paper argues that the accounting standards’ requirement for pension scheme liabilities to be discounted by reference to market yields at the end of the reporting period on high quality corporate bonds, potentially produces an artificial result which is at odds with the “fair representation” objective of these standards. Design/methodology/approach –The approach is a theoretical analysis of the relevant reporting standards with the use of a theoretical example to demonstrate the impact where trustees adopt a hedged approach to portfolio investment. Findings - Where the fund has adopted a hedging strategy and has invested in “risk – free” assets, the term, quantity and duration/maturity of which, is intended to match the term quantity and maturity of the scheme liabilities, applying the requirements potentially results in the reporting in sponsoring company financial statements of fluctuating surpluses or deficits each year which are potentially ill-informed and misleading. Originality/value – Pension scheme surpluses or deficits reported in the financial statements of listed companies are potentially very significant numbers, however the dangers posed by theoretical nature of the calculation has largely gone unreported.

Item Type:	Monograph (Working Paper)
Additional Information:	Working Paper N287-17
Keywords:	Fair representation; risk free; hedging;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	8944
Depositing User:	Ms Sandra Doherty
Date Deposited:	02 Nov 2017 16:45
Publisher:	National University of Ireland Maynooth
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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