Accounting Standards

Pension Risks: Accounting Change Could Inflate Pension Gains

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AT&T, Verizon Communications and Honeywell International have switched to fair value accounting for pension losses/gains.

Some big companies are changing the way they account for their pension plans in a way that could pad earnings if interest rates start to rise.  "I don't know that analysts are even going to know that is going on."

More and more companies, particularly those with large employee pensions, have switched to fair value or mark-to-market accounting for calculating actuarial gains and losses rather than amortizing them over a period of years, thus positioning for potentially sizable earnings boosts in coming years, warns Dr. Charles Mulford, professor of accounting and finance at The Georgia Institute of Technology in Atlanta. 

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