Have Changes in Pension Accounting Changed Pension Provision? A Review of the Evidence

Accounting and Business Research, Vol. 39, No. 3, 2009

39 Pages Posted: 28 Mar 2009

See all articles by Paraskevi Vicky Kiosse

Paraskevi Vicky Kiosse

University of Exeter Business School

Ken V. Peasnell

Lancaster University - Department of Accounting and Finance

Date Written: March 27, 2009

Abstract

The present paper reviews the research evidence on the impact of changes in pension accounting methods on pension provision. We show that decisions to freeze, terminate or convert defined benefit (DB) plans have been driven primarily by a desire to limit contributions, though financial reporting has played a part as well. The introduction of accrual accounting requirements for post-retirement health care benefits in the U.S. similar in character to those required for DB pension liabilities appear to have motivated some firms to curtail health care provision. Changes in accounting for DB schemes have affected how firms allocate pension plan assets. We conclude that accounting matters, though perhaps not as much as is sometimes claimed. Increased costs of providing DB pensions, coupled with the greater volatility of employers' cash contributions, have undoubtedly played the major part in the decline of DB schemes.

Keywords: pension provision, accounting standards, pension regulation, portfolio asset composition, post-retirement health care

JEL Classification: J32, G23, M41

Suggested Citation

Kiosse, Paraskevi Vicky and Peasnell, Kenneth V., Have Changes in Pension Accounting Changed Pension Provision? A Review of the Evidence (March 27, 2009). Accounting and Business Research, Vol. 39, No. 3, 2009. Available at SSRN: https://ssrn.com/abstract=1365368

Paraskevi Vicky Kiosse

University of Exeter Business School ( email )

Exeter, EX4 4PU
United Kingdom

Kenneth V. Peasnell (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
+44 1524 593631 (Phone)
+44 1524 847321 (Fax)

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