On June 16, 2011, the IASB released its amendments to IAS 19 (Employee Benefits).  David Zion, accounting research analyst for Credit Suisse, reviews the implications of the amendments and concludes that “now it’s FASB’s turn” to “fix” pension accounting. In fact, he recommends that the FASB simply expose the new IASB rules, as is, to FASB constituents and respond to feedback as a way to get the ball rolling.

 Essentially, the new IASB rules eliminate the smoothing mechanisms currently present in U.S. GAAP, including the elimination of the need to estimate the expected return on plan assets.  As a result, Zion says, “companies won’t have to worry about the earnings impact of their pension asset allocation decisions and can instead focus more on the underlying economics and risks. That could result in an increased emphasis on liability-driven-investing, which could change asset allocations” …  sounds to me like a good research question for academic accounting researchers to investigate.

 The article provides a good summary of what’s new about pension accounting as prescribed by the IASB amendments to IFRS 19.  Among other things, the article explains how much of the change in the value of the net pension asset or liability will hit net income and how much will hit OCI.  You can read the full article by clicking here.