The Pensions Research Accountants Group (PRAG) has published new guidance to update the current SORP used for the Scheme Report & Accounts.
The recommendations of this SORP are applicable for all Scheme years commencing on or after 1 January 2025 and will replace the current SORP 2018.
Much of this SORP is based on the international reporting standard FRS 102, and the fair value disclosure amendments.
FRED 82 proposes several amendments to accounting requirements to reflect changes in IFRS Accounting standards which The Pensions Research Accountants Group (PRAG) SORP working party will be considering the changes set out in FRED 82, and a revised SORP will be issued alongside the revised FRS 102 and other impacted FRS.
What are the changes?
The three changes that will impact the SORP and Pension Schemes going forward are:
- Changes to fair value measurement definitions to reflect the principles of IFRS 13 ‘Fair Value Measurement’.
This change could potentially change how some investments are valued.
- Some proposed changes to expected credit loss disclosures to include quantitative and qualitative information about amounts arising from expected credit losses on certain financial instruments such as loans. The proposed disclosures are only applicable when a rare decision has been made to apply IFRS 9 on Financial Instruments. However, the Financial Reporting Council’s (FRC) decision on whether to align FRS 102 with the expected credit loss model of financial asset impairment from IFRS 9 Financial Instruments will be deferred to a further consultation.
The change to risk disclosures could change the scope of what is disclosed. It could increase the scope of risks to be considered and could potentially give more latitude to consider risks in a way more aligned with how the Trustees view risks.
- An amendment to pension scheme risk disclosures as follows: “A retirement benefit plan shall disclose information that enables users of its financial statements to evaluate the nature and extent of credit risk and market risk arising from financial instruments to which the retirement benefit plan is exposed at the end of the reporting period, and which may impact the ability of the plan to pay the promised retirement benefits to members.”
Another area for consideration is the additional reports included within the Annual Report such as DC Chairs Statements, Implementation Statements and TCFD information on climate related matters. Consideration should be given to whether the Annual Report is the right place for these reports. This would require a change in regulations.
The proposed effective date of the amendments set out in the revised SORP is for periods beginning on or after 1 January 2025.
If you like to know more details about this topic, please get in contact with us.