Pension plan accounting estimates and the freezing of defined benefit pension plans

2011 ◽  
Vol 51 (1-2) ◽  
pp. 115-133 ◽  
Author(s):  
Joseph Comprix ◽  
Karl A. Muller
2014 ◽  
Vol 28 (4) ◽  
pp. 819-845 ◽  
Author(s):  
Mark P. Bauman ◽  
Kenneth W. Shaw

SYNOPSIS Accounting for defined-benefit pension plans is complex, and reported financial statement amounts are significantly impacted by a myriad of assumptions. In its interpretative release FR-72 (SEC 2003), the SEC called for more informative and transparent Management Discussion and Analysis (MD&A) disclosure of critical accounting estimates (CAE), including those regarding pension plans. This paper uses a random sample of 147 firms with relatively large defined-benefit pension plans to analyze firms' MD&A pension-related critical accounting estimate disclosures. We find that 60 (61) percent of our sample firms quantify the effect on pension measurements—primarily pension expense—of a given change in discount rates (expected asset returns). The median effect on earnings per share of these CAE-disclosing firms is between two and three cents. Firms rarely disclose the effects of potential changes in future salary assumptions or other estimates on pension measurements. While FR-72 encourages MD&A disclosure of information to assess the past accuracy of or predict future changes in critical accounting estimates, few firms provide such information with respect to their pension plans, suggesting avenues for improvement in disclosures. Finally, we use logistic regression to analyze the determinants of firms' decisions to disclose the sensitivity of pension expense to pension discount rate or expected asset return assumptions. Results indicate that the likelihood of providing a discount rate or expected asset return CAE is positively related to firm size, having a Big 4 auditor, and the variability of pension plan funded status, and is lower for firms operating in regulated industries and for firms with better-funded pension plans.


2011 ◽  
Vol 11 (3) ◽  
pp. 65 ◽  
Author(s):  
Kenneth E. Stone ◽  
David W. Joy ◽  
Cynthia J. Thomas

Responding financial analysts preferred pension plan accounting which contrasts with requirements of SFAS No. 87. The preferred model included: (1) Plan assets and accumulated benefit obligations are on the balance sheet. (2) Prior service cost is recognized in the year of plan adoption or amendment. (3) Gains and losses are recognized when they occur. (4) Annual pension expense is computer by netting the change in fair value of plan assets, deposits to the pension plan, and the change in accumulated benefit obligations.


2000 ◽  
Vol 2 (2) ◽  
pp. 47-69 ◽  
Author(s):  
Arun Muralidhar ◽  
Ronald van der Wouden

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