Group Report for Problem Based Learning: Retirement Benefits

3.1. FRS 17: Retirement Benefits Adopted by UK companies, FRS17 sets out the standard of how companies in the UK should deal with retirement benefits. It was introduced to create more transparency and to give shareholders a better idea of the cost to companies of pension schemes. The standard recognises gains and losses in the financial statements as soon as they are paid. Finance directors fear that these volatile pension figures could have major impacts on the profit and loss accounts.

'The main requirements of FRS 17 are:

pension scheme assets are measured using market values,

pension scheme liabilities are measured using a projected unit method and discounted at an AA corporate bond rate,

the pension scheme surplus or deficit is recognised in full on the balance sheet, and

the movement in the scheme surplus or deficit is analysed into:

current and past service costs which are recognised in operating profit,

the interest cost and expected return on assets which are recognised as other finance costs, and

actuarial gains and losses which are recognised in the statement of total recognised gains and losses.'


It was felt by the International Accounting Standards Board (IASB) that FRS 17 gave companies too much room for manoeuvre in how they calculated expected investment returns on their pension fund, therefore they introduced IAS 19.

Parts 4 and 5 of this report have been omitted for the purpose of this example.

6. Conclusion

In conclusion, FRS 17 and IAS 19 were introduced to set out strict guidelines on how companies should deal with retirement benefits, so that the treatment of these benefits is consistent with all companies. FRS 17 replaced SSAP 24, because there were a number of problems with the old standard. The main problem was the different valuation methods, which affected costs in the financial statements.

Many companies have decided not to adopt FRS 17. This could be because of the large material effects on the balance sheet, which are caused by the standard. It could also be because IAS 19 will become compulsory in the following year, and therefore it would not be worth changing standards twice.

It is hoped that over the next few years, most companies will adopt IAS 19 rather than using pro forma disclosures, as this will enable financial statements to provide a true and fair view of the retirement benefit funds.

This is a good report: it is full of factual information, much of which is written in the writer’s own words although reference is made to appropriate source documents. The student makes good use of quotations and adopts an appropriate style for a report, e.g. bullet points and headings, concise language, and summaries of key points.


This is a good introduction setting out several points: what the accounting standard covers; why it was introduced; how these costs are treated; and the main concern with the standard.

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Quality: Structure

The use of headings here and throughout the report is helpful to the reader, showing clearly the way in which the writing has been organised.

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Although this is a long quote it is appropriate in the context of this report, which is to provide a summary of key facts which could be used as a revision document. The writer has correctly judged that this information could not be further summarised..Bulleted lists are appropriate in a report and are very useful in providing an accessible summary of the key points of a subject, in this case the main requirements of FRS 17.

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The acronym IASB is here written out in full as it is the first time it has appeared in this document.

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Quality: Authority

The reference here is in an acceptable format as the requirement stated that the text should be produced as an online document. It is intended that student readers use the web links for revision.

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Function: Describe

The report writer gives a good explanation as to why the International Accounting Standards Board (IASB) did not replicate the requirements of FRS 17 in their standard on pension costs IAS19.

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This is a good concluding section of the report, largely descriptive and summative as is appropriate for a revision document.

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Function: Analyse

This paragraph presents a clear analysis of the reasons why companies have not adopted FRS 17 drawing on evidence included in the report.

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