Marie Leone, CFO.com | US
January 21, 2008

My point about liabilities

Liabilities were included, but apparently under the assumption that there will be no change in how to calculate the fair value of a liability, despite the change in definition.

For example, you seem to be presuming that the current effective settlement approach for PBO (using the return on high quality bonds for the discount rate) will fly under the new definition.

Posted by Daniel Moore | Mar 27, 2008 11:04 AM ET

Fair Value of Pension Obligations Included

We appreciate the opportunity to clarify how our study on pensions was conducted.

We recalculated pension expense and earnings assuming changes in the fair value of both pension assets and pension obligations were included. We did find that the effects on earnings were greater due to changes in the fair value of plan assets, but both were included.

Our conclusions were based solely on the findings - that earnings volatility will increase if fair value changes in pension assets and liabilities are included.

Posted by CHARLES MULFORD | Mar 27, 2008 8:36 AM ET

Mulford study half-baked

The Mulford study, essentially an update of the 2002 Credit Suisse 'The Magic of Pension Accounting' got some things right. Namely, FASB has telegraphed that phase 2 pension accounting will be mark-to-market.

The gaping hole in the study is that it fails to take into account the change in the definition of fair value under FAS 157, and the effect that will have on the liability measurement. Pension assets are only half the story.

The conclusion of the study is a non-sequitur - that market analysts are dumb, so when they are presented with identical information in a vastly different format, they will come to vastly different conclusions. This premise was disproven by the fact that FAS 158 was a non-event, despite dire predictions.

Posted by Daniel Moore | Mar 27, 2008 7:39 AM ET