Shares in BAE Systems (LON:BA) have jumped in London today, with investors responding positively to news that a new accounting standard is unlikely to have a material impact for its 2018 year and beyond. The British defence contractor further reached an agreement to revise the funding arrangements for its pension scheme.
As of 09:16 GMT, BAE Systems’ share price had jumped 2.21 percent to 556.00p. The shares are outperforming the broader UK market, with the benchmark FTSE 100 index having slipped marginally into the red and currently standing 0.20 percent lower at 7,378.85 points.
New accounting standard
BAE Systems updated investors this morning on its transition to the International Financial Reporting Standard (IFRS) 15, which is effective from January 1. The company noted that the impact of the standard on underlying earnings per share for the year ending 31 December 2018 and beyond “is not expected to be material”.
The company also does not anticipate impact on the way it manages its contracts, nor impact on lifetime revenue and profitability of contracts or the timing of cash receipts, which are determined by the terms and conditions of contracts with the customers.
The company announced in a separate statement that after consultation with the UK Pensions Regulator, it had reached agreements with each of the Trustee Boards of its defined benefit pension schemes on the 2017 triennial funding valuations and deficit recovery plans.
The current annual deficit recovery payments of about £205 million will increase by £15 million to about £220 million in 2018. Under the new deficit recovery plans, the payments would subsequently drop by about £50 million in 2022 and end in 2026.
Today’s updates come after the defence contractor recently announced that it will slash nearly 2,000 jobs, and reiterated its earnings outlook for the current year.