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The new international standard on pension accounting finalized last week includes subtle changes that could have ramifications beyond financial accounting, KPMG have warned.

The firm said the headline measures in the new version of IAS 19 – Employee Benefits – were set out in an exposure draft released last year. But it flagged two changes to the final version of the standard that “at first seem subtle but may ultimately have broader consequences.”

The first is that companies will have to separately disclose the costs of running employee benefit plans, other than asset management costs. Typically, companies deduct these costs from the expected return on plan assets and report the net figure.

“The requirement to separate these out will perhaps bring more of a board-level focus on the costs of maintaining defined benefit provision, and hence lead to pressure to reduce provider costs,” the firm said.

The second change is that companies will have to include the cash cost of paying pension obligations, even if the cash transaction has been outside of the pension scheme. This will expose the true cost of, for example, giving former employees cash payments as part of an enhanced pension transfer – such payments are often buried among general expenses.

The most significant change in the standard – for UK companies – is the replacement of the current expected return on plan assets credit in the income statement with one based on interest on the plan assets at the AA discount rate.  In the current market, expected returns for a typical pension plan portfolio can be around 1% higher than AA discount rates; KPMG estimate that the change will dent UK reported profits by around £10bn.

Mike Smedley, KPMG pensions partner, said: “The changes are overall broadly welcome from a financial reporting perspective, although some companies may feel that the P&L charge will now overstate the real cost of pensions.

The new version of IAS 19 is effective for accounting periods beginning on or after 1 January 2013, with earlier adoption permitted.