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Mr Zion says their plans were underfunded by $145 billion.FASB proposes that companies put on their balance sheets the difference between the value of pension-plan assets and the present value of their obligations, a number that is now tucked away in footnotes.
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For states and cities that are not required to use the new discounting method, the value of their pension obligations will look about the same as today.
If home values keep dropping, some local governments may have to lower appraised values, jeopardizing their revenue streams and reducing the rating and value of their general obligation bonds.
How much they should put aside depends in part on the interest rate companies use to calculate the present value of their future pension obligations.
We see between 1875 and 1896 a deflation of about 1% a year in the general CPI... On the monetary side, this deflation made many bank loans turn sour, as the debtors struggled to honor their obligations with rising real value of their debts.
The ratings agency said that in the future, it will add states' unfunded pension obligations together with the value of their bonds, and consider the totals when rating their credit.
Low interest rates mean that the value of future obligations look very large in today's dollars.
Because this is a smaller number than many companies used before, the present value of the obligations will be higher.
A combination of poor market returns and low interest rates, which will make the present value of pension obligations look much larger, threatens the health of many plans.
G.M. is benefiting from investment changes it made in the last few years to make the value of its pension assets mirror the value of the obligations even when market conditions change.
The method that US Airways used to derive the new amount "is not in the mainstream for calculating the value of pension obligations," stated Jeremy Bulow, an economics professor at Stanford University's school of business, in court papers supporting the government's position.
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CEO of Professional Science Editing for Scientists @ prosciediting.com