Home » 2020 » September

European Parliament passes PRIPs with minor changes

first_imgA previous draft of the regulation said it would capture pension products “where the employer or employee has no choice as to the pension product or provider”.The revised draft has seen the words “employer” and “pension product” removed.Klaus Stiefermann, managing director at aba, told IPE: “There has not been a genuine improvement for us.”The regulation will now be the subject of trialogue discussions together with the European Council and the Commission.Since the aba first raised its concerns, debates have been ongoing as to how to read the new regulation correctly.Some had argued occupational pensions would be excluded, with only third-pillar pensions forced to meet the above-mentioned requirements.European Insurance and Occupational Pensions Authority chairman Gabriel Bernardino recently told IPE he strongly recommended an obligation for pension funds, especially DC plans, to hand out a KID to their members.He added that whether further information disclosure requirements for pensions were introduced “in one or the other piece of legislation” was not his concern. A European regulation aiming for increased transparency for investment products has been passed by the European Parliament, but its passage has not allayed fears it could still be applied to some second-pillar pension funds.German pension fund association aba previously raised concerns over a revised draft for the Packaged Retail Investment Products (PRIPs) regulation, which could have required second-pillar pension vehicles to issue a Key Investment Document (KID).The passed regulation saw only one minor change incorporated into the draft, within the paragraph specifying the criteria allowing for pension product exclusion.The regulation now only applies to pension provision if the employee has no choice as to the provider.last_img read more

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Governments must convince people to work longer – OECD

first_img“Ensuring everyone has a decent standard of living after a life of work should be at the heart of policies,” Gurría said.In a new report called ‘Pensions at a Glance 2013’, the organisation said policy action was also needed to avoid rises in inequality among retirees and pensioner poverty.The report includes data on the 34 OECD member states – countries in North America, Europe, Australasia, Japan and South Korea – as well as countries outside the organisation such as Argentina, Brazil, China, India, Indonesia, the Russian Federation, Saudi Arabia and South Africa.By 2050, most OECD countries will have a retirement age of at least 67 years for both men and women – an increase of about 3.5 years from current levels for men and 4.5 years for women, according to the report.It said recent pensions reforms meant that not only would most young people starting work now have to save more for retirement, but that they would also get lower pensions than generations before them.Although working longer may compensate for some of these reductions, overall, each year of contribution will pay out less than it does today, the report found.Keeping down the costs of running personal and occupational pension schemes is critical, the OECD said.It said governments needed to tackle this issue urgently as part of their efforts to promote private pension systems. Reforming pension systems around the world has helped limit the rise in costs resulting from ageing populations and increased longevity, but governments still need to do more, according to a report by the Organisation for Economic Co-operation and Development (OECD).The OECD said policymakers had to go further in encouraging people to work longer and save more for their retirement.Angel Gurría, OECD secretary-general, said: “Raising retirement ages and promoting private pensions are all steps in the right direction, but, alone, they are insufficient.”He said governments needed to think about the long-term impact on social cohesion, inequality and poverty.last_img read more

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​US regulator limits regulatory move on proxy-advisory space

first_imgProxy advisers provide recommendations to shareholders on topics as diverse as executive pay, board appointments and acquisitions.The SEC released a seven-page Staff Legal Bulletin detailing 13 Q&As on 30 June.The guidance falls short of imposing a new regulatory regime on proxy-advisory firms.Instead, it is largely aimed at investment advisers who engage proxy advisers.The SEC began its review of the proxy-advisory market in July 2010 when it issued its so-called proxy plumbing concept release.This consultation paper – the first of three steps in the US regulator’s rule-making process – mulled the prospect of an overhaul of the mechanics of the entire proxy voting system.The SEC said it wanted to gauge how far shifting shareholder demographics and changes in technology meant “rule revisions should be considered to promote greater efficiency and transparency.”SEC chairman Mary Schapiro said: “To result in effective governance, the transmission of this communication between investors and public companies must be timely, accurate, unbiased and fair.”According to figures quoted by the SEC in 2010, more than 600bn shares are voted at more than 13,000 shareholder meetings every year.Proxy-voting rules were last subject to a major overhaul some three decades ago.Regulating the market is, however, a challenge. Although some proxy advisers offer services that stray into the territory of investment advice and fiduciary capacity, others go no further than offering a take-it-or-leave-it research and vote-management service.Critics of proxy advisers, among them the companies whose corporate governance shortcomings they comment on, claim advisers’ proxies are subject to conflicts of interest and operate through opaque models and methodologies.In April, the Canadian Securities Administrators published a consultation document in which it set out best practice for the proxy industry.The Canadian proposals remind issuers they “may engage with their shareholders, who have the ultimate responsibility of determining how to exercise their right to vote, to explain why they have adopted a given corporate governance practice”.The European Union has also stepped into the arena and issued proposals to regulate proxy advisers as part of its shake-up of the 2007 Shareholder Rights Directive.Here the EU makes the case for improving transparency around the activities of proxy advisers.The Commission’s move comes after the ESMA’s failed bid to regulate proxy advisers in 2013.Wilson told IPE she believes the Commission has confused problems in the US market with Europe.“We have no issue with transparency to our clients – that is our contractual obligation,” she said. ”However, not all proxy advisers share the same business model.“For example, Manifest, in its vote-agency capacity, does not ‘control’ votes. We facilitate and manage a client’s instructions under a strictly defined service contract.“Controlling a vote is a fiduciary act and something that cannot be outsourced. This is the major difference between the US and the European model.”Wilson also pointed to the Commission’s proposal that advisers must guarantee their research as particularly worrying.“We can’t do that, no investment analyst can do that, and auditors don’t do that,” she said.”We offer a point of view that is based on public information assessed against a client’s pre-agreed governance policy.“We can’t guarantee a recommendation to follow any particular course is accurate – we are simply offering an opinion based on a particular set of facts.“For example, a company might have a joint chairman and chief executive. There are investors who will always vote against that, no matter why it has arisen.”As for the way forward, Wilson said she hoped the Commission would “go back to the drawing board with these proposals” and instead focus on the investor’s fiduciary responsibilities, as well as the substantial flaws in the voting process itself.She added: “The EU position is behind the pace set by the SEC and the Canada. As they stand, the proposals will have the unintended effect of embedding service providers more deeply into the stewardship debate rather than focusing on the owners.“If there are concerns about market dominance and competition, that is a matter that should be addressed through a reference to DG COMP.” A senior member of the UK proxy voting community has welcomed the release by the US Securities & Exchange Commission (SEC) of staff guidance dealing with the responsibilities of investment advisers and exemptions from proxy regulation for proxy advisers.Sarah Wilson, chief executive and founder of Manifest Information Services, told IPE: “I am pleased with the outcome. The SEC has pointed out there are already regulations to address these issues.“Where there is a problem, the SEC has followed the Canadian lead and suggested companies pick up the phone and speak to shareholders where there are concerns about what a proxy adviser is saying.”In the US, Institutional Shareholder Services and Glass Lewis dominate the market.last_img read more

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Loek Sibbing takes reins at newly launched Dutch Investment Institution

first_imgLoek Sibbing, former chief executive at Univest, Unilever’s asset manager, is to manage the newly launched Dutch Investment Institution (NII), which will act as a broker between institutional investors and local companies in need of long-term financing.Sibbing said the private institution would focus on infrastructure, energy, care and SMEs, as well as investments in sustainability.“The scale of this kind of project, in combination with a lack of specific expertise on risk and return among investors, often hampered financing,” he said.“By removing these barriers, the NII can make more institutional assets available for the Dutch economy.” The foundation of the NII was financed by a large number of Dutch institutional investors, including the large pension funds PFZW, PME and PMT and asset managers PGGM and MN. These parties, as well as other Dutch and foreign institutional players, can invest through the NII, which will be operational shortly.It has already fleshed out investment options, including the financing of SMEs, housing corporations, infrastructure and healthcare.In addition, it has designed an assessment framework for future finance requests.In other news, property investor Syntrus Achmea Real Estate & Finance has seen signs that the Dutch property market is improving.In its forecast for the coming years, it said domestic rental property and mortgages were in demand by pension funds.“We are seeing a turn for all Dutch property markets, including the upmarket retail and offices sectors,” said chief executive Henk Jelgersma, who added that many assets were available for “a solid mix of return and certainty”.“Moreover, we are noticing that foreign investors are also showing an increased interest in Dutch property.”Syntrus Achmea RE&F, which has €14bn of assets under management for 50 pension funds, said it spotted opportunities in particular for domestic rental property in the mid segment.Jelgersma: “Demand for rental property is structurally increasing, following population growth and population ageing.”He said approximately 10,000 homes were needed in the Dutch Randstad, adding that pension funds’ interest in domestic mortgages was considerable.“Pension funds convert part of their government bonds into mortgages – for better returns with a similar risk profile,” he said.“The yield difference between government bonds and mortgages has increased to 200 basis points, which is a very good premium for slightly increased risk and a lower liquidity.”last_img read more

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Dutch pension fund PWRI awards real estate, mortgage mandate to F&C

first_imgPWRI, the €8.3bn pension fund for disabled workers in the Netherlands, has extended its fiduciary mandate with F&C for €882m of real estate and residential mortgage holdings.The mandate is for strategic advice, including portfolio construction, manager selection, monitoring, reporting and daily-management support, such as the allocation of cash flows.Kees de Wit, chairman of PWRI’s investment committee, said: “F&C, with its expertise of the property and mortgages markets … will enable us to make the right investment choices for our strategic portfolio.”He said the pension fund’s investment decisions were based not only on a risk/return assessment but ESG criteria. PWRI has already appointed F&C as its adviser for and executor of its ESG investment policy.F&C has €103bn in assets under management, including €35bn for institutional investors in the Netherlands.last_img read more

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Joseph Mariathasan: Nutrition is a shareholder issue

first_imgNutrition is unequivocally a shareholder issue, Joseph Mariathasan arguesShould malnutrition be an issue for responsible shareholders? The answer is an unequivocal yes. The issue is not so much one of starvation but the opposite. By 2030, close to 50% of the world’s population is projected to be overweight or obese, I am told by Lauren Compere, a board member of the Access to Nutrition Foundation.Obesity already costs the global economy approximately $2trn (€1.8bn) annually, nearly 3% of global GDP. Much if this can be blamed on dietary changes in the last 50 years or so promulgated by food companies. In emerging markets, we are seeing rapid increases in diseases, such as diabetes, that are associated with obesity as populations change their diets to include more processed food with high sugar content, more red meat, etc.Food companies are not, by nature, undertaking activities that are evil. Yet perceptions of what is acceptable are rapidly changing. Will sugar become the new tobacco? That debate has already begun. Rising global healthcare costs linked to obesity have led to the adoption of sugar and fat taxes in 10 countries, signifying the beginning of a trend. In middle-income countries such as Mexico, the rising double burden of under-nutrition and obesity puts pressure on the government to adopt a sugar tax. Not surprisingly, increasing global obesity rates, especially in children, have led investors to question marketing practices to children and low-income and minority communities in places like the US, says Compere. NGO campaigns are also increasingly targeting companies offering cereal and soft drink products in emerging markets. Cereals have been touted for decades as the healthy breakfast in the West. Foisting high-priced sugar-laden coco-puffs as a healthy replacement for traditional breakfasts across the globe may increase the profits for food companies, but it comes at the expense of the health and wealth of the new consumers.In January, the Access to Nutrition Foundation launched its 2016 Global Access to Nutrition Index (ATNI), ranking the 22 largest food and beverage companies on their nutrition practices. The index evaluates companies on corporate strategy, management and governance related to nutrition, the formulation and delivery of appropriate affordable and accessible products, and positive influence on consumer choice and behaviour through nutrition information, food marketing and labelling. The index report concludes that, while some companies have taken positive steps since the last ranking in 2013, the food and beverage industry as a whole is moving far too slowly.It is interesting that among the top-rated companies is Nestlé, which achieved notoriety in the 1970s when it marketed breast-milk substitutes in poor countries as a tastier and healthier replacement for breastfeeding. This, of course, was later proved false, but the image that Western foods such as breast milk substitutes are healthier still persists among many of the world’s poor.Nestlé, to its credit, has been rated amongst the top three in the index along with Unilever and Danone as having done more than their peers in integrating nutrition into their business models and producing healthier products. According to the report, they aim for lower levels of sugar, salt or fats, and higher levels of healthier ingredients. They also ensure affordable pricing and wider distribution of healthier products in emerging markets.As the debate over better nutrition develops, global food and beverage companies continue to face significant headwind risks to their business models. As the index report outlines, changing consumer preferences towards healthier foods is decreasing sales of sugary drinks and snacks. The Top 25 global food and beverage players have lost $18bn in sales since 2009.The winners in the food and beverage industry are likely to be those players able to follow these changing trends. That means less unhealthy ingredients such as salt, sugar or saturated and trans fats in processed foods and clearer labelling so consumers can actually understand the nutritional information on food packaging.The biggest issue may lie in emerging markets, where, with rising income levels, packaged foods sales are growing 10 times faster than in high-income countries. Companies have a responsibility to apply the same standards they use in their home country – such as nutritional profiling, product reformulation, marketing practices and labelling – to global markets. Agreeing they can lower standards because local market regulations allow them to do so is a lame excuse that may ultimately damage the brand, as companies selling breast milk substitutes found to their cost.Joseph Mariathasan is a contributing editor at IPElast_img read more

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France’s Ircantec launches energy-transition roadmap

first_imgIn Paris, Costes set out the commitments the scheme has already made – as signatory to the Montreal Carbon Pledge last year, for example – and then said that, above and beyond these engagements, “it is actions and results that count”.To build on the scheme’s actions so far, the Ircantec board of directors earlier this month unanimously approved a four-year roadmap for how the scheme’s €9.2bn of reserves would be used to further the transition to a low-carbon economy.In France, this is known as “la transition écologique et énergetique”, or TEE for short.According to Caroline Le Meaux, head of delegated management at Caisse de Dépôts et Consignations (CDC), fiduciary manager for Ircantec, the roadmap is more of an intensification than a change of direction.It sets out an investment policy based on four “axes”: engagement, measurement, financing and communication.Under the former, Ircantec is updating its shareholder voting policy to demand that company executives’ variable pay be linked to the company’s strategy with respect to the energy transition, which should include “significant” investment in research and development.  Ircantec reserves the right to vote against AGM resolutions if this is not the case, according to Costes.In relation to the second “axis”, Ircantec has committed to measure the carbon footprint of the scheme’s listed equity portfolios annually and reduce the footprint over time.This could involve scaling back investments in “depreciable assets”, notably in the fossil fuel sector.Financing – the third axis – is “the heart of the machine”, said Costes, and it is in this context Ircantec will be aiming to make climate risk an integral part of asset allocation and its mandates.It will look closely at opportunities to invest in funds specifically dedicated to financing the energy transaction, he said, noting that that the upcoming renewal of several asset management mandates was “perfect timing” for Ircantec to be able to put into practice these ideas.Mandates focusNearly €8bn of assets are currently being managed under 10 Ircantec mandates, although the scheme may not renew all of these, according to CDC’s Le Meaux.The renewal process will be rolled out over a 12-month period across several tenders.At the end of March, Ircantec awarded to Access Capital Partners a €130m unlisted multi-asset mandate for co-investments in private equity, private debt and infrastructure.The private equity investments can be in companies with less than €250m in turnover, while the private debt investments will comprise mezzanine and unitranche debt in companies of less than €500m of revenues, although Ircantec is targeting smaller companies than that, with less than €100m of turnover.  The infrastructure investments will be in renewable energy and energy-efficiency assets and as such very linked to the energy transition, Le Meaux said. Costes also signalled the possibility of future Ircantec mandates requiring alignment with standards set under (SRI) labelling initiatives launched by the government.In September and then December last year, the government announced two different labels that asset managers can obtain for investment funds if they meet certain criteria relating to social, environmental and governance considerations in their investment policy.The labels are for retail-targeted funds but Eric Loiselet, Ircantec board member, said they can be seen as setting minimum standards for the wider investment community and are something that public institutions such as Ircantec will need to take into account.The first label that was announced is the TEEC label, which is focused on climate change, with a more general socially responsible investment (SRI) label having been announced in December. Ircantec, the €9.2bn French supplementary public sector pension scheme, has launched a four-year roadmap setting out its approach to the low-carbon transition, noting that the upcoming renewal of a large number of mandates would be “perfect timing” for it to put its ideas into practice.The roadmap was presented by Jean-Pierre Costes, president of the board of directors at Ircantec, at an event in the Hôtel de Ville in Paris on Wednesday evening.Ircantec is a pay-as-you-go pension scheme for a range of public sector employees, including national government employees, elected local government officials and non-civil service contract staff.It has €9.2bn of reserves under management. last_img read more

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Corporate pension plans urged to ‘mirror’ sponsors on sustainability

first_imgA failure by corporate pension plans to adopt responsible investment policies and practices could undermine sponsors’ sustainability goals, according to the organisations behind the Principles for Responsible Investment (PRI) and the UN Global Compact.Corporate pension plans were lagging corporates and other institutional investors in recognising the benefits of incorporating environmental, social and governance (ESG) considerations into their investment decision-making, they said.“While significant numbers of institutional investors and corporations are now integrating [ESG] factors, corporate pension plans remain a sleeping giant,” said Lise Kingo, CEO and executive director at the UN Global Compact, and Fiona Reynolds, managing director at the PRI.They said that capital from the corporate pension sector needed to be mobilised if the UN Sustainable Development Goals were to be achieved. Publishing a guide to facilitate greater take-up of ESG by corporate pension schemes, the organisations called on chief executives to encourage funds to mirror their sponsor’s sustainability values.Kingo said: “We strongly believe that corporate plans need to align with their sponsors’ sustainability philosophy. Otherwise, investment decisions will be out of step and could actually be undermining the stated aims of the sponsoring corporation’s strategy.”The report said that many corporates and leading institutional investors had changed their way of thinking about how company value is created and sustained over time. Corporate executives, for example, were “more likely to consider other stakeholders, including customers, suppliers, and employees, as well as shareholders, in assessing a corporate’s competitive advantage, sustainable growth potential, and longer-term viability,” according to the report.However, it said corporate pension plans remained under-represented among investor groups that explicitly integrate ESG in their investment decision-making, especially when compared with public pension plans and endowments.The report noted that, although almost 50% of the world’s largest corporates were Global Compact signatories, only 10% of their pension funds were signed up to the PRI.It gave Unilever as an example of alignment between the sponsor and its pension scheme. It said Unilever had transformed itself and was widely regarded as a world leader in sustainability, and that its pension plan, overseen by its internal management company Univest, recently became a PRI signatory with the support of its CIO, Mark Walker. According to the report, in many corporate pension plans ESG was still perceived as not adding value to investment decision-making. It said these views were outdated and that responsible investment had many benefits, such as boosting sponsor credibility and supporting deficit management.The Global Compact is a UN initiative based on a set of CEO commitments to 10 key sustainability principles.last_img read more

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Reaction: UK prime minister calls for general election

first_imgUK prime minister Theresa May has called for a general election on 8 June in a bid to strengthen the ruling Conservative Party’s majority in government ahead of the start of negotiations to leave the European Union.Speaking outside her official residence in London this morning, she said her government had “the right plan” for Brexit and criticised her opponents’ approaches following last summer’s referendum.May argued that more votes for the Conservatives would “make me stronger when I negotiate for Britain with the prime ministers, presidents, and chancellors of the EU”.She reiterated her desire for a “deep and special partnership between a strong and successful EU and a UK that is free to chart its own way in the world”, echoing the wording of her letter last month to the EU triggering Article 50 and beginning the exit process. Politicians will vote tomorrow on whether to agree to a June election. Two-thirds of MPs are required to support the motion to overrule the Fixed Term Parliament Act, which had set the next election for May 2020. Jeremy Corbyn, leader of the opposition Labour Party and therefore its candidate for prime minister, has previously supported the idea of an early election. Betting companies have the Conservative Party as the overwhelming favourites to win the poll.Sterling rebounded strongly versus the US dollar today, after initially falling immediately prior to the speech.“The unexpected election further highlights the number of unknowns facing markets in the period ahead, with very little margin for error when markets stand at historically high valuations,” said Peter Hensman, fund manager at Newton Investment Management. “Geopolitics, politics, and monetary policy changes all have the scope to challenge becalmed financial conditions and warrant a cautious positioning.”Despite the Conservatives’ strong position, AXA Investment Managers’ senior economist David Page said there was “a real risk that the outcome of an 8 June election would be to make a material change to the government and hence alter the course of the proposed Brexit negotiations”.“Markets now appear reconciled with the UK’s chosen Brexit path and the possibility of increasing the security of this outlook appears appealing,” Page added. “To this extent, we suggest that signs that the [Conservatives] might struggle to increase their majority and hence shift the envisioned path of Brexit could have an adverse impact on markets over the coming weeks. But with uncertainty increased, we should expect an increase in volatility, particularly as polling begins over the coming days.”last_img read more

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Sponsors ‘must review DB terms’ after accounting rule change

first_imgThe board now plans to consult with a wider range of stakeholders around the world to assess the impact of the proposed amendment outside the UK.Alex Waite, a partner with consultants Lane Clark & Peacock (LCP) told IPE: “In terms of steps that sponsors can take, they must take a careful look at their rules and work out if there is anything there that they can tweak with the agreement of their trustees. We have seen companies do this successfully in a number of cases.”Aon Hewitt senior consultant Simon Robinson added: “[Companies] need to look at their scheme rules and confirm whether this is a problem for them.“There are schemes out there that are unaffected by this change. We have no idea within my firm how many companies are affected or not.”Sponsors, he said, might benefit from a major rethink of their approach to their DB schemes.“They might want to look again at the powers their trustees have, or even reconsider their funding strategy,” Robinson said. “Equally, a company might in future be less likely to put funding into the scheme. An alternative funding mechanism would be another issue to look at.”The IASB’s Interpretations Committee launched its IFRIC 14 project back in 2014. It published an exposure detailing changes to the guidance document in 2015.Willis Towers Watson senior consultant Andrew Mandley said: “I’ve been encouraging clients to look at what their scheme rules say about trustee powers to buy out benefits and establish how extensive those powers are. If this amendment goes the way it appears to be going and trustees have a power to buy out benefits, then sponsors must think about what the impact of that might be.”He said that if the IASB issued the final amendment before the end of the year there would be an expectation on companies to explain the impact in line with the requirements of IAS 8, which covers accounting changes and error corrections.“It should be fairly straightforward to see if there is a relevant buyout power, but what is more complicated is working out the financial impact of the asset ceiling restriction,” Mandley said.Meanwhile, LCP partner Tim Marklew said he sensed UK companies would feel unfairly treated by the changes.“Very similar plans with very similar obligations could be reporting very different figures under the amended IFRIC 14,” he said. “I certainly think if you were a finance director who was being forced to have an extra liability on your balance sheet, while your competitor had dodged it because of the way their scheme rules were drafted, you would be very angry about this.”In a meeting paper presented to the board, IASB staff concluded that the nature of UK DB schemes meant that they fell within the scope of paragraph 12A of IFRIC 14 (see paragraphs 19 and 20 of Agenda Paper 12C).This meant that sponsors of such plans would be unable to assume a refund of a surplus based on gradual settlement. This reflected the board’s intent in developing the amendments.In arriving at this conclusion, staff argued that a scheme’s trustees “could exercise [a] right to settle plan liabilities for all plan members in a single event.” Despite the fact that UK schemes “do not usually have sufficient funding” to allow trustees to settle all liabilities in a single event, such as an insurance buyout, they concluded that “the funding level of the plan should not factor into this assessment”.Paragraph 11 of IFRIC 14 requires entities to ignore funding levels when assessing the availability of a surplus. Consultants have urged UK defined benefit (DB) scheme sponsors to take seriously the risk posed to corporate balance sheets by controversial new accounting rules.“Companies might… reconsider their funding strategy. They might in future be less likely to put funding into a scheme.”Simon Robinson, Aon HewittThe International Accounting Standards Board (IASB) has proposed changes to the asset ceiling test under International Accounting Standard 19, Employee Benefits (IAS 19). This affects how DB deficits and surpluses are reported on company balance sheets.The IASB confirmed at its latest meeting that it would press ahead with potential changes to its asset ceiling guidance, known as IFRIC 14. Members noted analysis confirming that amendments could see some companies forced to recognise a substantially greater pension liability on their balance sheets than at present.last_img read more

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