FASB Votes to Revise Pension Rules (This may be the big kahuna)

[banana republican]

<snip>
In a unanimous vote, the Financial Accounting Standards Board approved its staff's recommendation for a two-pronged approach, the first stage of which could result in new rules by the end of next year. Critics and securities regulators long have complained that the current rules let companies obscure their future obligations to employees and manipulate the profits they report to investors.

<snip>

The initial phase of revisions, if enacted, could force many large manufacturers with significantly underfunded pension obligations to slash their reported shareholder equity. FASB members estimated that the change would affect corporate balance sheets by hundreds of billions of dollars.

Mr. Herz said he hoped the board could have a draft of the initial changes ready for public release by spring 2006.

<snip>


on edit Link

http://online.wsj.com/article/SB113163806074193621.html?mod=DAT
Hang on to your shorts here it comes.....

[newblewtoo]

1. About F'n time

Corps need to 'tell it like it is' not just pump and dump. The Fed pension bail outs can't last forever.

[BeatleBoot]

2. This is huge.

While it is needed, the ramifications on businesses who have played that game will be devastating.

General Motors comes to mind.

[Jacobin]

3. This is enormously important

and will negatively impact profits of the Fortune 500 and many others in a very very big way.

Interesting how one little accounting regulation can create so much havoc.

About time they stopped companies from using ponzi schemes to cheat retirees out of their money

[lovuian]

4. Finally they do it finally!!!

Now it will be interesting how many corporations will be around after this one???

[FlemingsGhost]

5. Daaaaaaaa-yuuuuum!

This is significant.

[Mountainman]

6. Stockholders will demand the corp drop the pension plan and to not pay

benefits. It will be the workers against the owners and the workers will lose. I never had enough money to invest but it looks like those who did will be in the same boat as me. Only thing is that I didn't have to put any of my pay check into to lose.

[papau]

7. I was there when Herz did the WSJ interview in New York today - and

he indicated that it would be 10 years for a new standard approach to go into effect - and that a short term fix dealing with FAS 87 smoothing being too heavy handed might come out first.

Also the use of account value for cash balance plans is likely, but the use of projected liab being replaced by accumulated liab. is unlikely to happen soon.

Indeed in a later meeting at the Sheraton Towers today Hertz went into detail about the problems facing the proposed FAS 87 changes.

He did note that the initial phase of revisions, if enacted, could force many large manufacturers with significantly underfunded pension obligations into problems on debt covenants -

But he appears to have at least Moody's on board as to changing how the rating service views pension accounting numbers (currently the FAS87 numbers are tossed as Moody's adjusts the account for what they believe should be the proper accounting.

In any case it is interesting that the WSJ had their reporters there - I wish I had stayed for the later NPR interview with a different "name" on the pension plan accounting possible changes. It is interesting how this is being song and danced into the media.

[freethought]

8. Good News but I don't think

The last word has been spoken on this issue. Not by a long shot.

[papau]

9. I agree - as does Herz - the main gig for this was a series of seminars

at the Hilton across the Street fron the Sheraton at 53rd and 7th.

The takeway - for me - was the 10 year time frame to get a real re-do of FAS87.

The fast track (12 to 24 month) down and dirty changes were just going to be a quick fix.

[hang a left]

10. kick

[converted_democrat]

11. Hell ya, bout time! n/t

[redqueen]

12. Well this has been sorely needed for quite some time.

Glad to see it finally in the works!

[Sgent]

13. The issues are large in amount

but not particularly complex. I don't understand why FASB thinkis it will take 10 years for a real pension accounting.

Since they haven't issued anything yet, I'm assuming they are going to require companies use a discount rate equal to a pile of AA+ bonds with a weighted duration of their pension liabilities -- something they should have done long ago.

This of course means the end for traditional defined benefit pensions. Some unions in especially strong companies might keep them for a while, but they will essentially be dead -- it will either be cash balance or 401k type.

This could also bankrupt quite a few compqnies due to loan and credit line requirements that they maintain certain financial ratios (debt to equity, etc).

[warrens]

14. I worked there for two years a long time ago

This is great, but it has to go through a lengthy comment period, and then the sausage-making begins. FASB's only clout is that if you don't conform to their rules, your financial statements can't say Generally Accepted Accounting Principles, and investors may not want to take a chance on you.

The pressure is going to be ENORMOUS to water this down.