Accounting rulemakers defend pension-accounting changes

WASHINGTON — Proposed changes to pension-accounting rules could help save companies and pensions, top accounting standard-setters said Wednesday.

Public companies currently disclose pension information in the footnotes of their financial reports. The Financial Accounting Standards Board has proposed a rule change that would bring the same information onto the company’s balance sheet, which it hopes to finalize this fall and phase in over the next two years, FASB Chairman Robert Herz testified at a Senate Banking Committee hearing.

While the FASB’s pension proposal has been controversial, generating hundreds of comment letters, Senate Banking Committee Chairman Richard Shelby, R-Ala., praised the idea, saying it would make financial statements more accurate and reliable.

Sir David Tweedie, chairman of the International Accounting Standards Board, who testified at the same hearing, said forcing companies to prominently disclose the health of their pension plans should be beneficial to investors, employers and employees. He said a similar push in Britain has highlighted the problem of underfunded pension plans and led to “a lot of behavioral change which has actually safeguarded pensions.”

The FASB plans to attack the problem in stages. In the first stage, it would require companies to show on their books whether pensions and other retirement benefits are over or underfunded, starting for annual reports after this Dec. 15.