US. New Accounting Rules Could Shift Pension Investment Mix
New accounting rules could prompt companies to accelerate the shift toward investing pension plans in safer, fixed-income assets, according to a recent report by Goldman Sachs Asset Management.
The new guidelines focus on how and where on financial statements companies record pension plan expenses. Companies will have to separate employee service costs from other aspects of pension and postretirement benefit costs, such as expected return on plan assets and interest costs on the obligation. Businesses will be allowed to capitalize only the service cost component, and record the impact of plan return assumptions only in net income and earnings per share.
Under current rules, companies present the figures as an aggregate that is either reported in the operating section of the income statement or capitalized into assets. As a result, plan return assumptions can affect the company’s operating income figures, as well as net income and earnings per share.
Read more @The Wall Street Journal
