Pension Accounting, Inside Debt, and Capital Structure

This study aims to examine how pension accounting relates to inside debt and capital structure. We introduce basic concepts of pension plans and pension accounting (including the determinants of pension liabilities, assets, and pension expense reported in financial statement) in accordance with U.S. GAAP (FAS 158) and IFRS (IAS 19). We also provide a review of empirical research on the pension accounting associated with earnings management and firm value. Finally, following Alderson and Lee (J Econ Bus, 40:209–228, 1988), this chapter introduces a developed model in which individuals and corporations have an incentive to engage in pension plans to deals with corporate pension funding policy as part of the capital structure decision.