An end to smoothing
Analysts have often griped that the true state of US companies' financial health is obscured by smoothing techniques permitted in pension accounting. But increased scrutiny by regulators and legislators could soon put an end to this practice - with potentially dramatic consequences
US firms could soon face a harsh reality check. A joint House of Representative-Senate congressional committee, formed just as Risk was going to press, will seek to formulate legislation to increase transparency in the reporting of company pension liabilities. This is expected to be passed by mid-2006, and it is likely to force companies to use more realistic market-based discount rate assumptions when calculating their pension liabilities.
And Congress is not alone. In November 2005, the US
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