Examining the Accounting for Defined Benefit Pension Costs

• In Event: Emerging Research Session III: Issues in Financial Accounting

Abstract

Accounting for defined benefit plans represents a complex, cumbersome and critical component of financial reporting for United States companies. This study examines how and, more importantly, why current accounting standards for defined pension costs evolved and how we believe they will soon evolve. We thus critically examine all significant U.S. accounting standards related to defined benefit plans enacted since 1948, analyzed to grasp the specific rules and their underlying motivation and logic behind them.
After examining current US standards for accounting for defined benefit pensions, we discuss related international financial reporting standards [IFRS] in light of the global accounting convergence project. We then compare how 30 large US corporations now recognize their current defined benefit obligations to how they would recognized these obligations under IFRS, generally finding that they would report lower pension costs, and even some pension assets.

Authors

• Natalie T Churyk, Northern Illinois University

• Alan Reinstein, Wayne State University

• Stefan Thomas, Northern Illinois University