Law to modernise corporate reporting requirements: The Bundestag passes reporting reform bill
The German Parliament passed the law to modernise corporate reporting requirements (BilMoG) on 26.03.2009.
The changes in the area of corporate pension schemes are those previously known:
Changes in the assessment of accruals
Company accruals which are to be used for future liabilities will be more realistically assessed in the future. For the evaluation of pension accruals on the balance sheet, this means:
· Provision for future developments
When calculating pension accruals, future expected wage, price and personnel developments are also to be considered. This means that the legally required adjustment of current pensions, according to commercially reasonable pension trends, are also to be included in the assessment of liabilities.
· Discount of interest for accruals using the market rate
Liabilities with a duration of more than one year are to be discounted using a market rate of interest averaged over the previous seven years and given by the Bundesbank. A duration congruity is required, from which larger balances can deviate (first-year convention: duration 15 years)
· Assessment procedure
In the future, the required amount due for future liabilities according to commercially reasonable assessment can be disclosed. There will be, however, no explicit legal guidelines regarding the assessment procedure, and options remain. The chosen procedure must be given in the appendix to the balance sheet.
· Balancing
Pension accruals must be balanced in the future with assets which are exclusively intended for the payment of debts from liabilities to employees and which are protected from other creditors. This will mean a significantly reduced balance sheet disclosure for a congruent reinsured pension commitment, as only the delta between the pension accruals and the corresponding reserved assets are to be disclosed.
· Fair value accounting
Plan assets, which are exclusively reserved for the payment of pension commitments, are to be assessed in the future using fair value accounting.
The assessemnt of accruals will be index-linked. The new regulations will therefore lead to an increase for pension accruals.
In order to attenuate this effect, the law allows for the allocation to the accruals to be distributed over a period of 15 years. The tax regulations of §6a EstG (income tax law) remain unchanged, so that no tax deficit will occur.
Still no passivation requirement for indirect pension commitments
Article 28 para. 1 clause 2 EGHGB (Introductory Act to the German Commercial Code) will remain. There will therefore also in the future be no passivation requirement for indirect pension commitments.
Entry into force
The law is to come into force immediately after its approval by the Bundesrat (planned for April 2009). The new accounting regulations will be legally required for financial years from 1st January 2010. They may, naturally, be used for the financial statement in 2009, but only in their entirety. Some regulations, especially regarding the implementation of EU regulations, will already be legally required for the financial year 2009.
Maria Hiemer – SLPM – 27.03.2009