Incorporating Uncertainty into Accounting Estimates of Pension Liabilities

8 Pages Posted: 18 May 2012 Last revised: 24 May 2012

See all articles by Ulrich Menzefricke

Ulrich Menzefricke

University of Toronto - Rotman School of Management

Wally Smieliauskas

University of Toronto - Rotman School of Management

Date Written: Spring 2012

Abstract

This paper develops a model for obtaining an estimate of pension shortfall at a given time point and uses this model to analyze how defined benefit pension plan accounting is affected by uncertainty about rates of return. Results show that the risks of underfunding are much higher than indicated in current financial reporting. We propose that these risks be disclosed in financial reporting so as to address the disclosure problems identified in prior research.

Keywords: Pension Accounting, Pension Fund, Pension Shortfall, Uncertainty in Rates of Return

Suggested Citation

Menzefricke, Ulrich and Smieliauskas, Wally, Incorporating Uncertainty into Accounting Estimates of Pension Liabilities (Spring 2012). Rotman International Journal of Pension Management, Vol. 5, No. 1, p. 26, 2012, Available at SSRN: https://ssrn.com/abstract=2061689

Ulrich Menzefricke (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Wally Smieliauskas

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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