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Essay / Research Paper Abstract
A 3 page paper agreeing with the perspective that GAAP should rule how pension funds are reported. GAAP provides greater benefit to the organization relying on stock price, and it also reduces the volatility of the market-based approach. Bibliography lists 5 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSacctPens.rtf
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Unformatted sample text from the term paper:
Pension and Welfare Benefits Administration audited 267 employee benefit plans in 1992 to find "that 19% of plans surveyed had GAAP violations and 33% violated Employee Retirement Income Security Act
guidelines for disclosure and reporting" (Walker 55). As poor a performance as these numbers indicate, they were much improved from a 1987 review in which 23 percent had GAAP
violations and 66 percent violated Employee Retirement Income Security Act (ERISA) guidelines (Walker 55). Since that time many pension plans have been discontinued,
and of course scrutiny of corporate accounting practices has been greatly increased following several notable corporate reporting scandals. Of those pension plans that remain, the Financial Accounting Standards Board
(FASB) provides clear guidelines. GAAP and FASB Requirements FASB Statements 36, 87, 132, and 132(Revised) address "defined-benefit pension plans and other postretirement benefits"
(Klamm and Spindle, 28), and FASB statements, of course, prescribe the form of and changes in GAAP (Berner, Boudreau and Peskin 25). FASB 87 "reaffirms the usefulness of information
based on accrual accounting. Accrual accounting goes beyond cash transactions to provide information about assets, liabilities, and earnings" (Summary of Statement No. 87).
Turner (2005) states that a current proposal for reform "is that pension accounting should be based on market-value accounting (mark-to-market) rather than the accrual (book value) accounting of SFAS
87" (9). The rationale is that pension funds are more like financial institutions than the organizations that create and maintain them, and that because financial institutions are required to
base reporting on market-value accounting, then so should pension funds (Turner 9). Both accountants and corporations generally object to that argument, and for several reasons. These include increased
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