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Have changes in pension accounting changed pension provision?: a review of the evidence

Research output: Contribution to Journal/MagazineJournal articlepeer-review

<mark>Journal publication date</mark>2009
<mark>Journal</mark>Accounting and Business Research
Issue number3
Number of pages13
Pages (from-to)255-267
Publication StatusPublished
<mark>Original language</mark>English


The present paper reviews the research evidence on the impact of changes in pension accounting methods on pension provision. We show that decisions to freeze, terminate or convert defined benefit (DB) plans have been driven primarily by a desire to limit contributions, though financial reporting has played a part as well. The introduction of accrual accounting requirements for post‐retirement health care benefits in the US similar in character to those required for DB pension liabilities appear to have motivated some firms to curtail health care provision. Changes in accounting for DB schemes have affected how firms allocate pension plan assets. We conclude that accounting matters, though perhaps not as much as is sometimes claimed. Increased costs of providing DB pensions, coupled with the greater volatility of employers’ cash contributions, have undoubtedly played the major part in the decline of DB schemes.