Assuming the worst: the shifting sands of pension accounting

Byrne, Alistair, Clacher, Iain, Hillier, David and Hodgson, Allan (2013) Assuming the worst: the shifting sands of pension accounting. Journal of Accounting and Management Information Systems, 12 2: 190-212.

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Name Description MIMEType Size Downloads
Author Byrne, Alistair
Clacher, Iain
Hillier, David
Hodgson, Allan
Title Assuming the worst: the shifting sands of pension accounting
Journal name Journal of Accounting and Management Information Systems
ISSN 1583-4387
Publication date 2013
Sub-type Article (original research)
Volume 12
Issue 2
Start page 190
End page 212
Total pages 23
Place of publication Bucharest, Romania
Publisher Academia de Studii Economice din Bucuresti
Collection year 2014
Language eng
Formatted abstract
Accounting for defined benefit pension plans is complex, and given the magnitude of many of these schemes relative to their corporate sponsor, understanding whether pension disclosures are value relevant is key to improving the quality of financial reports. The application of fair value accounting for pensions allows for a high level of managerial discretion with respect to ex ante accounting choices. Utilizing a sample of firms that apply FRS-17, we examine the main determinants of the assumptions managers use to arrive at pension scheme valuations. We find significant differences in the stated assumptions across companies, auditors and actuaries. Further, managers display considerable variation in conservatism when implementing fair value accounting, and this variation is related to scheme-specific characteristics, such as asset allocation and pension plan solvency. Crucially, pension disclosures are found to be value relevant, therefore, managers are able to present pension disclosures in a more favorable light, and this is reflected in prices. As a result of the observed inconsistency in reporting across firms, and the value relevance of these disclosures, this brings into question the efficacy of fair value accounting for assessing pension values.
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
UQ Business School Publications
 
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Created: Tue, 17 Sep 2013, 14:44:54 EST by Susan Peeters on behalf of UQ Business School