Other financial items

pensions

Pearson operates a variety of pension schemes. Our UK fund is by far the largest and we also have some smaller defined benefit funds in the US and Canada. Outside the UK, most of our people operate 401K (essentially defined contribution) plans. In 2001, after a full actuarial valuation, the company resumed cash contributions to its UK Pension Fund (a £1bn fund) following a prolonged 'holiday' period. At that time, this resulted in the scheme having a small surplus of £40m. Although the next full actuarial valuation is not due until 2004, the funding level is kept under regular review by the company and the Fund trustees. After an informal indication in 2002, and taking account of current stock market conditions, the company agreed to increase contributions by £5m to £25m in 2003, ahead of the full valuation in 2004. This was designed to keep the scheme fully funded.

In this report we have included additional disclosure in respect of FRS 17 'Retirement Benefits' for pensions and other post retirement benefits. FRS 17 approaches pension cost accounting from a balance sheet perspective with the net surplus or deficit in Pearson's pension schemes being incorporated into the balance sheet. Changes in this surplus or deficit will flow through the profit and loss account and the statement of total recognised gains and losses. In this report we have disclosed the effect on the profit & loss account and balance sheet in the notes to the accounts (see note 10).

accounting disclosures and policies

As described above we have included additional disclosure in respect of FRS 17 for pensions and other post retirement benefits in accordance with that standard. The mandatory implementation of FRS 17 has been postponed and is now not required to be implemented before adoption of International Accounting Standards in 2005. FRS 19 'Deferred Tax', has been adopted in these accounts and the comparative figures have been restated. The effect of FRS 19 is discussed above and in note 21 to the accounts.