The investment of capital paid into pension funds must be substantial enough to keep pace with inflation and growing numbers of retirees, while they must also remain stable and liquid enough to allow for regular disbursements to those currently collecting pensions. This makes pension funds substantially different from other company holdings and retirement account offerings, and the rules of accounting and reporting the assets and liabilities that pension plans represent have changed significantly over the years, reflecting the complexities and difficulties the Financial Accounting Standards Board has faced in finding accurate and effective ways of listing these funds on balance sheets (Bouvier 2010; Kossov 2010)
GAAP, greater leeway in accounting is cited by some as a cause of greater accuracy in reporting, while other see the manipulation of numbers as a danger to investors, government compliance, and companies themselves (Fortune 2005; Comprix & Muller 2010). As pensions are funded almost entirely through direct employee contributions or indirectly by concessions made to labor in the form of increased employer contributions as one form of compensation, a large degree of influence is exerted on labor negotiations and overall employee benefits as well as government policy by pension accounting practices (Comprix & Muller 2010)
S. GAAP allow companies to "smooth" their reporting of pension plans by using expected returns to offset current costs, as the primary purpose of pension funds held by the company is to earn interest (Fortune 2005)
Specific changes have been made to the way that companies must calculate their pension liabilities according to IASB standards, and firms in the United States are also finding themselves in a period of adjustment as alternative structures have proven more advantageous in separating and reducing liabilities (Bouvier 2010; Kossov 2010). By operating separate trusts for certain benefits, companies operating under GAAP can often greatly reduce their pension liability (Kossov 2010)
As of 2001, Pepsico froze its Defined Benefit Plan. (Burr, 2010) This is not good news for an employee, regardless of how successful the corporation is that they work for
The alternative measures have brought great deals of confusion and controversy and have resorted to using the applicability of market value of liabilities (MVL) to the public-sector pension obligations. For such a case, the market-based measures are explored and through this, an examination of the most fundamental public-sector decision makers are exhibited (Angelo 9)
The aspect of having a retirement plan is for the future of the employee concerning having their needs and wants to be fulfilled. This enables them to live comfortable lives (Kobal)
The third argument of the paper is that valuing liabilities is only a factor that enters the funding calculation. By using a riskless discount, it does not necessarily mean that the contributions increase immediately (Munnell et al
Moreover, in most cases, some portions of the contributions made by the employee are matched by the employee. By doing this, the costs raised by the employer are then debited to the Pension Expense (Warren, Reeve and Duchac 518)