Via WSJ (H/T Columbia Journalism Review).
Under current accounting rules, companies with defined-benefit pension plans, which promise to pay specified amounts to retirees, have the option to take several years to spread the cost of large pension gains and losses into earnings. That means that when a plan's investment results are much better or worse than expected—as with the 2008 market downturn—it can have a significant effect on earnings for years.
For that and other reasons, the system of accounting for pension results in earnings long has been widely criticized. The Financial Accounting Standards Board, the U.S. accounting rule maker, has examined the issue before but hasn't made any changes, though they may revisit it soon. AT&T, Verizon and Honeywell changed their accounting methods on their own initiative. While the details differ, all three said they would start recognizing some or all of their deferred losses in the year they occur, through a "mark-to-market" adjustment to fourth-quarter earnings to reflect their pension plan's returns for the year.
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