Amendments to FRS 102 for pension accounting

The Financial Reporting Council (FRC) has amended FRS 102 in relation to multi-employer defined benefit plans regarding the transition from defined contribution accounting to defined benefit accounting. The amendments are effective for accounting periods beginning on or after 1 January 2020, with early application permitted.

Some multi-employer defined benefit plans are carrying out exercises with a view to being able to provide, for the first time, sufficient information to participating employers to facilitate the use of defined benefit accounting. FRS 102 did not previously set out specific requirements to address the transition from defined contribution accounting to defined benefit accounting for a multi-employer pension plan.

FRS 102 now includes new and explicit requirements for how an entity should make the transition from defined contribution accounting to defined benefit accounting when sufficient information becomes available to do so.

An entity which has previously applied defined contribution accounting and had entered into an agreement that determined how it would fund a deficit, will have recognised a deficit funding liability for the contributions payable. The difference (which excludes the impact of any plan changes, settlements or curtailments) between any deficit funding liability and the net defined benefit liability (or asset) to be recognised under defined benefit accounting at initial recognition will need to be recognised in other comprehensive income.

An entity that has not recognised a deficit funding liability will recognise an amount equal to the measurement at initial recognition of the net defined benefit pension liability (or asset) in other comprehensive income.

The amount to be recognised in other comprehensive income on transition must be presented separately from any other items relating to post-employment benefits that are also presented in other comprehensive income.

The relevant date for making the transition to defined benefit accounting is the later of:

• the first day for which sufficient information to use defined benefit accounting becomes available; and
• the first day of the current reporting period.
• Comparative information is not re-stated.

If you have any further queries about these amendments or any other aspects of FRS 102, please speak to Danielle Stewart.