An International Analysis of Pension Reporting Alternatives

• In Event: Concurrent Session 2.4: International Financial Reporting

Abstract

This study analyzes cross-country variation in pension plan arrangements and financial reporting, and the valuation effects of alternative presentation approaches for reporting defined benefit (DB) pension-related information. We analyze 2,449 firm-year observations using primarily hand-collected data covering five reporting periods (2004-2008) and six countries (France, Germany, the Netherlands, the U.K., Canada, and the U.S.).
We observe wide variation in pension plan arrangements and defined benefit pension presentation approaches in the six countries studied. This result suggests that requiring uniformity in companies’ presentation practices will impose costs on affected firms. We also observe substantial cross-country differences in the value relevance of net income items as presented under different pension presentation alternatives. Our results indicate that the IASB should use caution when assessing economic effects “on average,” and should be aware that economic effects of alternative pension presentation approaches will vary across countries.

Authors

• Carol Ann Frost, University of North Texas

• Elizabeth Gordon, Temple University

• Lili Sun, University of North Texas