FASB's proposed first round of changes to FAS 87, the accounting rule regarding pension reporting, could cost shareholders of S&P 500 companies more than $248 billion, according to a new research report from Credit Suisse. The Financial Accounting Standards Board earlier this year recommended that U.S. public companies report the funded status of their pension plans on their balance sheets, as well as other postretirement employee benefit costs. Companies now can put that information in the footnotes section of their annual reports.
Under the proposed changes, S&P 500 companies would immediately show $145 billion in pension liabilities and $327 billion in OPEB costs, and would have aggregate shareholder equity reduced by an average of 6% per share, according to CS analyst David Zion's report, "The Hit to Equity." The report predicts that some companies may use available cash to help reduce the hit to equity, while others may seek to borrow to fund their pension plans.
The report said companies that would have been hit hardest in 2005, in terms of underfunded status and OPEB costs as a percentage reduction of their aggregate shareholder equity, are Goodyear Tire & Rubber Co. at 1,164%; Lucent Technologies, at 371%; General Motors Corp. at 277%; and Ford Motor Co., at 116%.
