Unrecognized Obligations and Deferred Recognition on Employee Benefits in Japan
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概要
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In this study, the effect of unrecognized obligations on employee benefits to stock prices is examined. Japanese accounting standards have been changed to harmonize with other standards, such as IAS (IFRSs), SFAS and FRS, and currently these standards are all fairly similar. However, there are still some differences in accounting procedures owing to specific economic circumstances or cultural reasons. With respect to accounting standards for employee benefits, Japan has adopted deferred recognition to recognize gains and losses, prior service cost and accounting changes. Therefore, these costs can be spread over several years. On the other hand, IAS (IFRSs) and SFAS have adopted the corridor approach for recognizing gains and losses, and they can recognize prior service cost immediately because they consider it as a prepaid expense. In the United Kingdom, all of these costs are recognized immediately. To examine the impact of unrecognized pension obligations on stock prices, the models of Barth, Beaver, and Landsman (1993) were employed, because they use both balance sheet data and profit and loss statement data to examine the relationship between pension obligations and stock prices. This analysis finds that pension cost components, pension obligations, and pension assets have some effects on stock prices. However, unrecognized net gain or loss and the length of deferred recognition are not recognized by investors. Therefore, not all information related to unrecognized obligations is considered by investors when evaluating companies. It is concluded that pension components are important for investor decision-making. However, since unrecognized net gain or loss and the length of deferred recognition are not recognized as important elements, there is a possibility that investors will be misled by deferred recognition in their attempt to understand financial statements.
- 関西学院大学の論文