Shocks Seen in New Math for Pensions
The New York Times, March 31st, 2006
The board that writes accounting rules for American business is proposing a
new method of reporting pension obligations that is likely to show that many
companies have a lot more debt than was obvious before.
In some cases, particularly at old industrial companies like automakers, the
newly disclosed obligations are likely to be so large that they will wipe out
the net worth of the company.
The panel, the Financial Accounting Standards Board, said the new method,
which it plans to issue today for public comment, would address a widespread
complaint about the current pension accounting method: that it exposes
shareholders and employees to billions of dollars in risks that they cannot
easily see or evaluate. The new accounting rule would also apply to retirees'
health plans and other benefits.
A member of the accounting board, George Batavick, said, "We took on this
project because the current accounting standards just don't provide complete
information about these obligations."
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