Pension Accounting and Corporate Earnings: the World According to Gaap
48 Pages Posted: 14 Jul 2006
Date Written: December 2005
This study's underlying premise is that current pension plan accounting has two important negative effects. First, it distorts the measurement of earnings and net worth in the short run, as well as the pattern of earnings over future periods. Second, this distortion can send incorrect signals to investors about a firm's health, resulting in the mispricing of a firm's outstanding debt and equity instruments. The author demonstrates how these distortions are introduced, examines the magnitude of the distortions, and discusses proposals for reform.
JEL Classification: E01, G12, G23, G35, M41
Suggested Citation: Suggested Citation