Accounting's Role in Providing for Life After Work

Abstract:     
Accounting standard setters have been rather ambiguous regarding the connections of the public interest ideal with reporting requirements placed on employer-sponsored pension plans. Recognition of the public interest involves a real and apparent contribution to the idea of the public. This rests on a capacity to contribute to the type of political economy to which accounting would claim its strongest commitment. In this regard, it is not surprising that pensions reporting has been justified using assumptions about the usefulness of reporting a marketised value. The social capital represented in a pension plan and its hoped-for release on the public purse does not sit well with representation according to its fitness for trading. By using available data on pension fund membership and benefit levels in three continents, the paper shows that the financial reporting model for private pension plans has shaped rather than reflect realities. Outcomes of reporting requirement include sponsors' withdrawal of support for pension plans, and transfer of payment obligations to investment consortia on the lookout for unrecognised financial value. Corollary transfer of the social security burden to the state has detracted from an important ideal of the profession and its credibility in the business community. Idealisation of the public interest obligation without consideration as to its discharge carries implications for the praxis of accounting.

Keywords: fair value, public interest, pensions accounting, superannuation, accounting for employee benefits

JEL Classification: M41, M44, M47, H50

working papers series