Discussion of 'Have Changes in Pension Accounting Changed Pension Provision? A Review of the Evidence'
Accounting and Business Research › Vol. 39 Nbr. 3, May 2009
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Summary
The core way that you have to manage a pension plan and the way it impacts your business is a risk decision more than it is necessarily an accounting standard decision. The significant message would be that you can and should measure these things and come up with reasonable estimates but at the same time that there is much that people can do to communicate what drives the risk behind these plans and how it can impact your business. The last point made here, which is probably the point with which the author agrees the most, is that accounting standards have driven asset allocation. The overall message is that there are many reasons for redesigning plans. Accounting, he believes, is one of them, but it is only one. In the UK, there was no coincidence that the rules around job-hopping risk, inflation risk and default risk, occurred around the same time that defined benefit was becoming less attractive.
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Discussion of 'Have Changes in Pension Accounting Changed Pension Provision? A Review of the Evidence'
Kiosse and Peasnell have provided us with a really good paper covering evidence on pension accounting and pension provision across a range of countries. As a practitioner I found it very useful.
The first point made was that the pension obligations are hard to measure, and undoubtedly they are. We talk a lot about reasonable estimates, and there can be very long discussions on what 'reasonable' is. I think our present position, at least from a practitioner's viewpoint, is that what we have to disclose doesn't really hit the core issues relating to...See the full content of this document
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