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Pension accounting and corporate earnings: the world according to GAAP


  • Peter Fortune


This 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.

Suggested Citation

  • Peter Fortune, 2005. "Pension accounting and corporate earnings: the world according to GAAP," Public Policy Discussion Paper 06-2, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbpp:06-2

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    References listed on IDEAS

    1. Annamaria Lusardi & Jonathan Skinner & Steven Venti, 2003. "Pension Accounting & Personal Saving," Just the Facts jtf8, Center for Retirement Research.
    2. Simon H. Kwan, 2003. "Underfunding of private pension plans," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun13.
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    Corporations - Accounting ; Pensions;

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