Interesting! Following a January call of an informal group of London's leading investment bank and fund management analysts (the "Corporate Reporting Users Forum"), a number of companies have started publishing and thus exposing to be challenged their longevity assumptions used for the valuation of pensions schemes, which are obviously critically important (via FT). Virtually at the same time, an assessment of pensions liabilities of 26 Swiss SMI-component firms has been published (via Vorsorgeforum). The average discount rate applied, while being in line with Swiss legal requirements, is an unsustainably high 4.25% (down from 4.61%). I suspect that longevity assumptions are not published.
This is precisely the way ahead with full fair value valuations as well, especially in those cases where price information is not directly attainable. There needs to be a critical dialogue between users and preparers of financial statements concerning assumptions used. This dialogue obviously checks preparers' position of power, which is probably why they are often reluctant to participate in that dialogue.
Friday, April 28, 2006
Transparent longevity assumptions
Labels: accounting, longevity
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