PRAG publishes updated Accounting for Derivatives in Pension Schemes – Guidance and Practical Assistance
The Pensions Research Accountants Group (PRAG) has published updated guidance to help the preparers of pension scheme accounts deal with the wide range of derivative contracts which feature in manager portfolios.
The industry body said its guidance does not form part of the 2018 statement of recommended practice (SORP) but attempts to explain and illustrate what is required under it.
The publication replaces recently withdrawn guidance issued in 2007 and is available to all members of PRAG through its website www.prag.org.uk.
PRAG derivatives working party co-chairs Lydia Song and Peter Luckhurst said: "The derivatives market is in constant change and the use of derivatives has continued to increase in all types of pension schemes.
"This derivatives guidance is designed to provide practical assistance to pension scheme accountants in understanding derivatives, maintaining accounting records for derivative contracts and how to report them in financial statements covering the requirements of FRS 102 and the 2018 version of the SORP."
Song and Luckhurst added: "As the derivatives market is highly dynamic, innovative and new products or variants of existing products are continuously being introduced, it is inevitable that not all derivative products used by pension schemes will be covered in the SORP and by this guidance. Therefore, generic principles and accounting treatment have been added to this guidance to enable readers to interpret and apply this guidance in these circumstances."
Shona Harvie, chair of the PRAG executive, added: "There are many challenges facing the preparers of pension scheme accounts when it comes to new derivative strategies used by pension schemes. Thank you very much to Lydia and Peter and the other members of the working party for putting together the updated guidance in this important area."
PRAG is a body of accountants and professionals working in the pensions industry and the organisation recognised by the Financial Reporting Council for the publication of the accounting guidance through the pensions statement of recommended practice.
PRAG also issues guidance on other topical areas and responds to consultations on areas affecting occupational pension schemes.
