NEW YORK — Wall Street firms might be beating the Financial Accounting Standards Board to the punch in implementing mark-to-market pension accounting.
The equity research desks of Morgan Stanley and Goldman Sachs & Co. are developing techniques to estimate the actual earnings — as opposed to the smoothed earnings — of pension plans of the companies they cover, according to money managers familiar with both firms.
The move would follow in the footsteps of Bear Stearns & Co. and Standard & Poor's, which in 2003 were the first high-profile companies to begin estimating the actual earnings of companies' pension funds.
If enough Wall Street firms follow suit, companies could be forced to pay closer attention to actual funding levels of their pension plans and could move toward liability-led investment strategies.
One money manager, who requested anonymity, said Morgan Stanley's equity research desk has been actively pitching the accounting method to investors. "This is something that equity analysts should have been doing all along, but the issue of pension funding didn't really come in to play until 2001 and '02," said the manager. A Morgan Stanley spokeswoman said firm officials declined to comment.
Another money manager, who also requested anonymity, said Goldman's equity research desk will begin estimating actual earnings of pension funds in all market sectors in the coming months. Ed Canaday, a Goldman spokesman, said the firm's equity research unit currently estimates the actual pension returns of companies only in troubled sectors, such as the auto and airline sectors. He could not offer further details.