IASB Chairman testifies before US Senate committee
15 Jun 2006
IASB Chairman Sir David Tweedie testified yesterday before the US Senate Committee on Banking, Housing and Urban Affairs, which was conducting a hearing on "FASB's Proposed Standard on Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans".
Accounting standard-setters often hear that accounting should not change behaviour, but there is a case, I fear, that poor accounting has led to neglect or mismanagement of pension resources. The numbers are staggering, and the emergence of large pension deficits are not confined to the United States. The overall deficit for the European companies in the Dow Jones STOXX 50 was €116 billion at 31 December 2004 and for the UK FTSE 100 was £37 billion at July 2005. The SEC staff estimated in June 2005 that the overall deficit for active US filers might be $201 billion. [Citations omitted] For a long time, companies and investors failed to give proper attention to a growing problem of increasingly unhealthy pension programmes, and the accounting shares some of the blame. The international standard, IAS 19 Employee Benefits, and US GAAP obscure reality by permitting gains and losses to be smoothed over time with the result that
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