FASB likely to announce fair-value pensions project in October

The US Financial Accounting Standards Board (FASB) will consider a proposal from its staff for the overhaul of pension accounting in October. Some analysts predict that it will subsequently add to its agenda a project to require mark-to-market accounting of US pension plans.

Peter Proestakes, project manager of pension reform at FASB in Connecticut told RiskNews that it’s possible that pension accounting rules could be “fundamentally changed”, but declined to predict the likely scope of any proposed reform.

David Zion, a research analyst at Credit Suisse First Boston (CSFB) in New York, said that any proposal to require companies to record pension plan assets and liabilities on balance sheet at fair value could be “among the most significant and contentious” projects that FASB has tackled in its 32-year history.

Meanwhile on Capitol Hill, two Senate committees have announced agreement on a pension funding and reform bill that addresses more systemic concerns. The bill – an outline of which was released earlier this week - appears to have sufficient bipartisan support to progress. One of the most important proposals is to link the rate used to discount pension obligations to 12-month average investment grade corporate bond rates, and then to split the discount rate into different maturity buckets.