Pension accounting and corporate earnings: the world according to GAAP
AbstractThis study’s underlying premise is that current pension plan accounting has two important negative effects. First, it distorts the measurement of earnings and net worth in the short run, as well as the pattern of earnings over future periods. Second, this distortion can send incorrect signals to investors about a firm’s health, resulting in the mispricing of a firm’s outstanding debt and equity instruments. The author demonstrates how these distortions are introduced, examines the magnitude of the distortions, and discusses proposals for reform.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Public Policy Discussion Paper with number 06-2.
Date of creation: 2005
Date of revision:
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- Annamaria Lusardi & Jonathan Skinner & Steven Venti, 2003. "Pension Accounting & Personal Saving," Just the Facts jtf8, Center for Retirement Research.
- Simon Kwan, 2003. "Underfunding of private pension plans," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun13.
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