FASB to Look Into Pension Standards

Accounting rule makers may change how companies must account for pension income and expenses, as pension assets pummeled by tumbling stock markets burn a hole in corporate pocketbooks.

The Financial Accounting Standards Board, which sets accounting rules for U.S. companies, will discuss whether to improve pension accounting rules in upcoming meetings with its advisory arm, Chairman Robert Herz said this week.

In recent weeks, pension liabilities have moved up on corporate America’s list of woes as the stock market, in danger of suffering its third straight losing year, leaves pension plans underfunded and pension costs start biting into earnings.

Overly optimistic assumptions about the returns companies expect to earn from their pension assets, which in turn can soften the blow to earnings, have also begun to draw scrutiny.

The accounting board, in particular, is reaching out to financial statement users such as analysts and fund managers to help decide whether it should add a project on pension accounting to its agenda, which is already crammed with other “hot button” issues, including stock options and bringing U.S. rules in line with international standards.

For his part, Herz makes no bones about how the current pension accounting rules in the United States leave much to be desired.

“It is complex, it’s somewhat opaque,” Herz said, adding that he had received mixed opinions on whether to modify current rules.

“I’m not too fond of pension accounting.”

Any new rules on pension accounting -- if the accounting board decides to head down that path -- will not be produced anytime soon. The board will not add such a project to its agenda at least until next year, Herz said.

In recent weeks, several companies, including IBM Corp. and General Motors Corp. have said their pension plans are underfunded.

At the end of this year, 98% of traditional pension funds, also known as defined benefit plans, at the 346 Standard & Poor’s 500 companies that have such plans, are expected to be underfunded, Merrill Lynch estimates.

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Merrill Lynch Issues Settlement Checks

Merrill Lynch & Co. has sent checks totaling roughly $100 million to 48 states, Washington, D.C., and Puerto Rico, under an agreement negotiated this year with New York state to settle charges its analysts misled investors.

The checks were cut Monday and have either been received by most states or will be shortly, a Merrill spokesman said.

Merrill, the nation’s largest brokerage, agreed to the fine in May after a 10-month investigation by New York Atty. Gen. Eliot Spitzer that uncovered e-mails from Merrill analysts disparaging stocks they publicly praised, allegedly to win lucrative investment banking business. The agreement forced the firm to separate research from its investment banking division, a move mirrored by Citigroup last month.

Under the terms of Merrill’s settlement, New York received the highest payout with $48 million because it took the lead in the investigation, said Marc Beauchamp, executive director of the North American Securities Administration Assn., an umbrella group for state securities regulators.

Beauchamp’s group received $2 million, while the remaining $50 million went to the other states, with the largest amounts going to those with the most people. California, for instance, took in $5.6 million, while Wyoming received $500,000, a floor set for the smaller states.

The lone holdouts not signing off on the national settlement with Merrill are Arizona and Missouri, slated to be paid $854,732 and $932,128, respectively, when they hammer out their differences with Merrill, NASAA and Merrill said.

From Associated Press

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Pitt’s Chief of Staff to Resign From SEC

Mark Radke, chief of staff to Securities and Exchange Commission Chairman Harvey L. Pitt, is leaving the agency, the third senior SEC official to resign this month.

Radke follows Pitt and SEC Chief Accountant Robert Herdman.

From Bloomberg News