Pension Reporting and Generally Accepted Accounting Principles
Discuss the topic of pension reporting and the Generally Accepted Accounting Principles regulation.
In an article in “Businessweek” related to pensions, it was reported that the discount rates used by the largest 200 companies for pension reporting ranged from 5% to 11%. How can such a situation exist, and does GAAP alleviate this problem? An article indicated that when GAAP rules were issued related to pensions, it caused an increase in the liability for pensions for approximately 20% of companies. Why might this situation occur?