The Institute of Certified Public Accountants of Kenya (ICPAK) has issued a stern warning regarding recent amendments to the Retirement Benefits Regulations, raising concerns about their compliance with International Financial Reporting Standards (IFRS).
In a press release, ICPAK, a statutory body established under the Accountants Act of 1978, highlighted its role in promoting professional standards and ensuring compliance among members. The Institute, which is also a member of the International Federation of Accountants (IFAC), expressed dismay over the amendments’ potential impact on the integrity of financial reporting within the pensions industry.
Chairman of ICPAK, CPA Philip Kakai, underscored the significance of adhering to global accounting standards, stating, “Non-compliance with International Financial Reporting Standards will result in qualified auditors’ reports on the financial statements of Retirement Benefits Schemes in Kenya.” He emphasized that such non-compliance could tarnish the reputation of Kenyan accountants internationally.
The amendments in question, issued through Legal Notice 18 of 2024 on January 18, 2024, alter the valuation methods for plan assets and the accounting treatment of exchange losses within retirement benefit schemes. The changes particularly affect the valuation of debt instruments and the determination of net interest credited to members’ accounts.
Kakai outlined two main areas of concern regarding the amendments: classification and valuation of plan assets, and accounting for exchange losses. He stressed that the alterations deviate from established IFRS guidelines, potentially undermining the accuracy and transparency of financial reporting within the pensions industry.
Regarding the valuation of plan assets, Kakai highlighted discrepancies between the amendments and IAS 26, a key international accounting standard governing the reporting of retirement benefit plans. He noted that the amendments fail to adhere to IAS 26’s requirement to value plan investments at fair market value, potentially leading to inaccurate financial statements.
Furthermore, ICPAK expressed reservations about the accounting treatment of exchange losses under the amended regulations. Kakai asserted that the exclusion of unrealized gains and losses arising from changes in the value of debt instruments could distort the true financial performance of retirement benefit schemes.
In response to these concerns, ICPAK announced plans to collaborate with the Retirement Benefits Authority (RBA) to address the discrepancies and provide guidance to preparers and auditors. The Institute emphasized the importance of ensuring compliance with international standards to uphold the integrity and credibility of financial reporting in Kenya.
