Accounting

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(Note: Where available, an online link to the resource is provided; in some cases, we are only able to provide the reference information)

• Accounting/Actuarial Bias Enables Equity Investment by Defined Benefit Pension Plans

This paper explores the fact that although pension finance theory says most defined benefit pension plans sponsored by publicly traded corporations should invest entirely in fixed income, 60% of assets are invested in equities.

• Actuaries discuss the principles of financial economics of pension accounting

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This article examines how financial economics, when applied to actuarial science, calls into question some basic principles.

• Did Pension Plan Accounting Contribute to a Stock Market Bubble?

by Julia Lynn Coronado and Steven A. Sharpe
During the 1990s, the asset portfolios of defined benefit (DB) pension plans ballooned with the booming stock market. Due to current accounting guidelines, the robust growth in pension assets resulted in a stealthy but substantial boost to the profits of sponsoring corporations. This study assesses the extent to which equity investors were fooled by pension accounting.

(Presented at "A Current Pension Actuarial practice in Light of Financial Economics Symposium" sponsored by the Society of Actuaries, Vancouver, June 2003)

• Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan?

by Li Jin, Robert C. Merton, and Zvi Bodie
This paper examines the empirical question of whether systematic equity risk of U.S. firms as measured by beta from the capital asset pricing model reflects the risk of their pension plans.

• "Does an ERISA Bias Lead to Equity Investment?"

• FASB - Statement of Financial Accounting, Concepts No. 7: Using Cash Flow Information and Present Value in Accounting Measurements (February 2000)
  

• Valuing Companies, Valuing Pension Plans

Failure to value pension plans properly can dramatically overvalue companies when pension assets are outgrowing liabilities and undervalue them when the reverse is true.

• What Are Corporate Pension Liabilities?

Analyses of corporate pension plans often make unstated assumptions about an implicit labor contract. These "implicit contract" assumptions are examined and questioned, and the implications of analyzed pension liabilities are explored.