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HMRC internal manual

International Manual

Thin capitalisation: practical guidance: accountancy issues: FRS 17: actuarial gains and losses

Actuarial gains and losses are changes in actuarial deficits or surpluses that arise because:

  • events have not coincided with the actuarial assumptions made for the last valuation (called experience gains and losses), or
  • actuarial assumptions have changed.

Actuarial gains and losses are recognised immediately in Statement of Total Recognised Gains and Losses, and they are not recycled into the profit and loss account in subsequent years.

Under IAS 19 it is possible for companies to adopt a policy of deferring gains and losses under a “corridor approach” in which actuarial gains and losses in excess of a de minimis amount are recognised in the profit and loss account. As noted in INTM523250, IAS 19 (revised) does not permit such an approach, so it is equivalent to the requirements of FRS 17 and requires all gains and losses to be recognised immediately in other comprehensive income. IAS 19 (revised) has been EU endorsed and is mandatory in accounting periods beginning on or after 1 January 2013.

The approach to actuarial gains and losses in FRS 102 is aligned to IAS 19 (revised).

Treatment for thin capitalisation purposes

Since actuarial gains and losses are not recycled into the profit and loss account and are not cash items, they do not normally impact on financial covenants.