The treatment of interest under SSAP 24

Article Abstract:

Balance sheet figures generated by the application of statement of standard accounting practice (SSAP) 24 in the UK can be analyzed by examining the deficiency or surplus of pension trusts as well as the results achieved when subtracting the amount of unamortized variations not yet recognized in the profit and loss account. The interest effects on the balance sheet of short term differences between recognition of cost and payment of contributions is not significant and can be ignored, but should be recognized in relation to longer term differences, particularly in relation to unfunded liabilities. Companies should account for imputed interest on balance sheet figures and account for variations in the profit and loss account on a basis that reflects the interest effects to avoid variations in actuarial valuations that result from failing to recognize the interest in periods in which it is accrued.

Interest, Interest (Finance)

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The balance sheet implications of SSAP 24

Article Abstract:

Statement of Standard Accounting Practice (SSAP) 24, in the accounting of pension assets and liabilities, creates balance sheet figures with a definable meaning. SSAP 24 requires companies to adopt a type of equity accounting for their pension funds. The recognition of the effect of variations is gradual rather than immediate. New variations are identified only every three years because of the lack of a requirement to undertake an annual actuarial valuation of a pension fund. SSAP 24 makes balance sheet figures tend towards surplus or deficit, but the balance sheet never actually reaches the amount due to the gradual figuring into the balance sheet of variations arising through amortization of the profit and loss account charge.

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SSAP 24: time to sort out the balance sheet

Article Abstract:

UK companies must use Statement of Standard Accounting Practice (SSAP) 24, Accounting for Pension Costs, to account for the costs of their pension plans. The Accounting Standards Board will need to address the issue of whether SSAP 24 is producing reasonable figures in the balance sheet or whether there is need for amendment to the SSAP so that it does so. SSAP 24 requires a profit and loss account treatment in which the long-term costs of providing benefits are smoothed over employees' terms of employment rationally and systematically, but double-entry bookkeeping sometimes yields balance sheet figures that do not seem sensible, a situation that will have to be remedied.

Accounting Standards Board

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