Fair-Value Pension Accounting

43 Pages Posted: 4 Jan 2007

See all articles by Rebecca N. Hann

Rebecca N. Hann

University of Maryland - Robert H. Smith School of Business

Frank Heflin

University of Georgia - J.M. Tull School of Accounting

K.R. Subramanyam

University of Southern California - Leventhal School of Accounting

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Date Written: March 2006

Abstract

We compare the value and credit relevance of financial statements under fair-value and smoothing (SFAS-87) models of pension accounting. The fair-value model does not improve the value relevance of the balance sheet and may impair that of income and the combined financial statements, unless transitory unrealized gains and losses (G&L) are disaggregated from more persistent income components. Further, the fair-value model improves the credit relevance of the balance sheet but impairs that of income and the combined financial statements, unless G&L is separated from other income components. Overall, our results suggest there are no informational benefits to adopting a fair-value pension accounting model.

Keywords: fair-value accounting, pension accounting, value relevance

JEL Classification: G12, G23, G33, M41, M44

Suggested Citation

Hann, Rebecca N. and Heflin, Frank and Subramanyam, K.R., Fair-Value Pension Accounting (March 2006). Available at SSRN: https://ssrn.com/abstract=954787 or http://dx.doi.org/10.2139/ssrn.954787

Rebecca N. Hann (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Frank Heflin

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706-542-1616 (Phone)
706-542-3630 (Fax)

K.R. Subramanyam

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States
213-740-5017 (Phone)
213-747-2815 (Fax)

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