The effect of pension accounting on corporate pension asset allocation

Eli Amir*, Yanling Guan, Dennis Oswald

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We examine the impact of new pension disclosures and subsequent full pension recognition under FRS 17 and IAS 19 in the United Kingdom and SFAS 158 in the United States on pension asset allocation. These standards require recognition of net pension surplus/deficit on the balance sheet and actuarial gains/losses in other comprehensive income. Therefore, these standards introduce volatility into comprehensive income and balance sheets. We identify a disclosure period during which UK companies disclosed all the required data under FRS 17 in the notes without recognition. We also identify a full recognition period starting 1 year before until 1 year after the adoption of FRS 17/IAS 19 (UK) and SFAS 158 (US). We predict and find that UK companies, on average, shifted pension assets from equity to debt securities during both the disclosure and the full recognition periods. We also find that while before the adoption of SFAS 158 US companies maintained a stable allocation to equities and bonds, these companies, on average, shifted funds from equities to bonds around the adoption of SFAS 158. Cross-sectional analysis shows that the shift away from equities is related to changes in funding levels, shorter investment horizons, increased financial leverage, and the expected impact of the new standards on shareholders' equity.

Original languageEnglish
Pages (from-to)345-366
Number of pages22
JournalReview of Accounting Studies
Issue number2
StatePublished - Jun 2010
Externally publishedYes


  • Defined benefit plans
  • FRS 17
  • IAS 19
  • Pension asset allocation
  • Pension surplus/deficit
  • SFAS 158


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