A rare audit qualification relating to FRS 17, the financial reporting standard on pensions, at the UK subsidiary of the US drugs group Merck, recently raised a few eyebrows within the accountancy and actuarial professions.
In the accounts, the auditor, PwC, qualified its report on the basis that they believed that the company had used an inappropriate discount rate in valuing the pension scheme liabilities. Rather than Merck’s discount rate of 6.0 per cent, PwC suggested that a more appropriate rate would have been in the range of 5.25 to 5.75 per cent. The auditor took the view that, in the absence of an actuarial calculation using a more appropriate discount factor, it was unable to quantify the extent of the understatement of the pension liabilities. Read more »