Transcripts

The FASB Hopes To Put The Balance Back In Balance Sheet

SUSIE GHARIB: There are big changes in the works tonight for America`s biggest companies when it comes to how they figure their bottom lines. New rules now in place from the Financial Accounting Standards Board mean firms will now have to account for the costs of retirement benefits on their balance sheets. As Stephanie Dhue reports, the idea is to give investors a better picture of a company`s true financial obligations.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The balance sheets of airlines, auto makers and parts suppliers will be among the hardest hit by the new accounting rules. The cost of pensions and health care benefits will be factored into their bottom lines beginning December 15.

HOWARD SILVERBLATT, SR. INDEX ANALYST, STANDARD & POOR`S: For the companies themselves it takes the information that was in a footnote and extremely difficult to understand and put into perspective and put it onto the balance sheet where people can see it a lot easier.

DHUE: Standard & Poor`s figures 352 companies in the S&P 500 will have to increase their liabilities by a combined $466 billion reducing the net worth of the S&P by 7 percent. The figure could have been higher if companies like Verizon, IBM and Motorola had not frozen their pension plans in anticipation of the new rule. The changes may become even more significant once companies reveal how they figure their retirement benefit costs.

SILVERBLATT: The methodology of how they calculate it was not changed yet; that`s phase two. This is just what`s on phase one and what looks the best, to some degree. The numbers are going to show a lot more once you get down and look at the assumptions.

DHUE: About 17 percent of U.S companies now have open defined benefit plans, down from more than 50 percent in the last decade. Experts say the accounting changes could drive that number down to 10 percent.

DALLAS SALISBURY, PRESIDENT, EMPLOYEE BENEFIT RESEARCH INSTITUTE: We`re going to continue to see a trend of companies freezing defined benefit plans. We`re going to continue to see a movement away from retiree medical benefits.

DHUE: The new rules shouldn`t come as a total shock. The Financial Accounting Standards Board first proposed the changes over a year ago. But experts say some analysts and portfolio managers are just beginning to focus on their impact. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.