The Impact of SFAS 88 Transactions: Puff or Economic Reality?

Many companies appear to be using the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) 88 to substantially increase their reported earnings. Companies with plan assets exceeding pension benefit obligations (PBO) have a substantial pool of off-bala...

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Bibliographic Details
Published inThe CPA journal (1975) Vol. 61; no. 10; p. 38
Main Authors Haw, In-Mu, Jung, Kooyul, Lilien, Steven B
Format Journal Article
LanguageEnglish
Published New York New York State Society of Certified Public Accountants 01.10.1991
Subjects
Accounting
Accounting standards
Amortization
Balance sheets
Costs
Defined benefit plans
Employees
Employers
Financial reporting
Financial statements
Net losses
Off balance sheet items
Pension plans
United States > US
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Summary:Many companies appear to be using the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) 88 to substantially increase their reported earnings. Companies with plan assets exceeding pension benefit obligations (PBO) have a substantial pool of off-balance-sheet deferred reductions in their pension provisions. They also have substantial discretion over timing and recognition of those deferrals. The mechanism for these transactions appears to be through settlement of portions of their pension plans. Companies can control the period in which these off-balance-sheet amounts are realized by using a transaction that need not be accompanied by a cash reversion. It is suggested that perhaps the FASB should reassess the manner of presenting SFAS 88 transactions and consider requiring accounting treatment comparable to that used for early debt redemptions.
ISSN:0732-8435