Help with your Accounting Disclosures

The Problem

BBS were contacted by a small manufacturing company in the South West, which was having difficulty obtaining the information they required in order to prepare the pension disclosures for their company accounts.  The company had a defined benefits scheme that was closed to further accrual.  The scheme was insured and the insurance company was unable to produce liability figures other than on the normal funding basis.

The Solution

BBS were able to take the figures from the latest funding valuation and, using the BBS Funding Modeller, analyse the effects of adopting alternative assumptions in line with the relevant accounting standard (FRS17).  In addition to advising on appropriate assumptions for the discount rate and future price inflation, we were able to take a close look at the mortality rates assumed, and to advise on a mortality table that more closely reflected the characteristics of the scheme membership.  We also pointed out that most members elected to take a cash lump sum at retirement, which resulted in a saving to the scheme, and that on this basis it would be possible to include an allowance for this in the liabilities calculated under FRS 17.  Similarly, we advised that considerably fewer members appeared to be married than implied by the funding assumptions, and this could also be reflected in the figures.

As a result of our advice, the company was able to improve its balance sheet and reduce the future charge to its profit and loss account.  BBS has also been retained to prepare the required disclosures in future years.