Mr. Seamus McCarthy:

In accrual accounting, there is a requirement that the liabilities that accrue in each year in relation to pensions are recognised in the financial statements. It was in previous years under what was called FRS, financial reporting standard, 17. That was the requirement. What it essentially means is that in relation to the staff who work in an organisation in a particular year, an estimate is made of the value of the future pension they will get in respect of the work they do in a particular year. It is quite technical. It is probably overdone in a way in many of the financial statements where one could have five or six pages of notes in the financial statements in relation to how pensions are accounted for. It is a very important economic cost and it is important that it is recognised.

Many of the members will probably be familiar with the concept of a pensions deficit in relation to organisations and private companies. In the public sector, as well as recognising the liabilities, organisations usually recognise a matching funding asset so that it balances the liabilities. The reason they do that is that in most cases in most public bodies there is guarantee or at least a statutory basis for the pension scheme, so the expectation is that the State will meet those pension liabilities in the future when they arise. On that basis, public bodies usually recognise a matching asset.

With a number of organisations where they are charging for services, particularly with the universities where there are fees and so on, there is not a firm guarantee in relation to the amount that will be provided. They will still recognise the matching asset but because there is not a guarantee underpinning it and because some of the funding may come from charges in the future, we draw attention to the fact that these are different. A lot of these bodies will have recognised the liability and recognised a matching asset, which we would understand will be met and they would understand will be met in the future from their grant funding. We draw attention to the exceptions.