Alert on credit crunch and pension measurements

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05 Dec 2008

Deloitte (United States) has published a Financial Reporting Alert that addresses the impact that the volatile financial markets and the broadening market decline may have had, and could have, on an entity's pension and other postretirement benefit calculations and disclosures.

Considerations for this financial reporting season include:

  • Balance sheet impact – asset valuation and funding status
  • Discount rate, including:
    • Issues relating to bond yield and bond selection when a company uses a hypothetical bond portfolio rather than a yield curve to support the discount rate to measure their postretirement benefit obligations
    • Use of index rates in selecting a discount rate
  • Expected long-term rate of return
  • Measurement of 2009 pension cost – the effect that decreases in plan assets and changes in postretirement benefit obligations could have on the computation of the gain or loss amortisation component of fiscal 2009 pension cost
  • Measurement date for plan assets and benefit obligations
  • Disclosures

The Financial Reporting Alert (PDF 62k) also discusses future considerations after this financial reporting season.

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