Honeywell International Inc., Morristown, N.J., will adopt a mark-to-market accounting policy for its pension plan expenses, a change from its current policy of smoothing asset returns and amortizing deferred gains and losses over a number of years.
As a result of the new policy, the company will recognize $5.5 billion of deferred losses in 2010, according to a news release from Honeywell.
“We think the difference in our reported pension expense relative to our peer group using our current accounting masks the underlying strength of our businesses,” Dave Anderson, Honeywell senior vice president and CFO, said in the news release. “We believe the adoption of MTM accounting will enable investors to more clearly evaluate the company’s operating performance by isolating annually any possible pension gains or losses outside the corridor through a MTM adjustment.”
Separately, Honeywell will make a $600 million cash contribution to its U.S. pension plan this quarter, bringing its total 2010 contribution to $1 billion, according to the news release. It also plans to contribute $1 billion in cash to the plan in 2011.
“Honeywell is planning steps to achieve fully funded status over the next few years,” Mr. Anderson said in the release. “Given today’s low interest rates, it’s an opportune time to access the credit markets and contribute cash to the U.S. plan. In the future, as we approach a fully funded status, we will evaluate our pension asset allocation with the objective of reducing pension expense variability going forward. We view the funding strategy, asset allocation, and adoption of MTM accounting as a comprehensive approach to pension management.”
Honeywell’s U.S. pension plan had assets of $13.8 billion as of Dec. 31, the most recent data available.