An Analysis of the Value of Cash Flow Statements of New Zealand Pension Schemes
9 Pages Posted: 26 Jun 2008 Last revised: 10 Aug 2008
Date Written: December 1, 2007
Superannuation (pension, retirement) schemes (plans) are required to report their earnings on a fair-value basis, reflecting recent shifts toward fair-value reporting in financial reporting. Fair-value earnings of such schemes include realized earnings and unrealized changes in values of assets and liabilities (unrealized earnings). This study examines the relation between components of fair-value earnings (realistic and unrealized) and cash flows of 161 New Zealand defined benefit schemes for the financial year 1998. The findings of the study include that realized earnings are negatively associated with unrealized earnings and positively associated with cash flows from operations, but no association is found between unrealized earnings and cash flows from operations. This suggests that fair-value reporting has reduced the informational disparity between realized earnings and operating cash flows and therefore the reporting of cash flows information may not provide users with different information from reported in realized earnings. However, the results suggest that unrealized earnings provide additional information to users.
Keywords: Superannuation schemes, pension plans, fair-value earnings, cash flows, New Zealand
JEL Classification: M41, G23, M49
Suggested Citation: Suggested Citation