AT&T Inc., Dallas, will cut $17 billion from retained earnings because of a change in how it accounts for actuarial gains and losses for pension and other postretirement benefits, the company said in a news release Thursday.
AT&T is cutting its discount rate on pension assets, to 5.8% from 6.5%, AT&T spokeswoman McCall Butler said in a telephone interview. The company also will use the actual fair value of plan assets in place of a GAAP averaging technique, making fund accounting more transparent, AT&T said in a statement.
The change is effective for the year ended Dec. 31, 2010, and has an expected pretax, non-cash charge of $2.7 billion, or 28 cents per share, in the fourth quarter.
“AT&T has elected to immediately recognize actuarial gains and losses in its operating results in the year in which the gains and losses occur,” the company stated in an SEC filing. “This change will improve transparency in AT&T's operating results by more quickly recognizing the effects of economic and interest rate trends on plan investments and assumptions.”
AT&T had $46.1 billion in defined benefit plan assets as of Sept. 30.