The Accounting Historians Journal Vol. 11, No. 2 Fall 1984
Mary S. Stone UNIVERSITY OF ALABAMA
THE PENSION ACCOUNTING MYTH
Abstract: This paper traces the development of pension accounting theory and practice to 1930. It analyzes the early development of pension accounting theory and practice, examines explanations of the nature of pension costs, and reports the results of a survey of pre-1930 pension disclosure practices.
The Financial Accounting Standards Board's employer pension accounting project has been described as "one of the most im-portant undertaken since the Board was established in 1973."1 Analyses of the project follow a standard format of (1) describing the pension pronouncements of the Accounting Principles Board (APB), (2) discussing the pension reform legislation of the 1970s and 1980s, and (3) criticizing the FASB's proposals for change. Absent is any consideration of pension accounting theory and practices developed between the establishment of the first U.S. private, pension plan in 18752 and the 1966 Accounting Principles Board Opinion No. 8.3 This omission underscores the myth that pension accounting theory and practice did not begin to develop until the advent of pension regulation.
To refute this myth, this paper reviews pension accounting theory and practice during the unregulated period prior to any pronounce-ment by the Accounting Principles Board, the securities laws (1933, 1934), the Social Security Act (1935), and much of the tax legis-lation directed at private pension plans (1928 and thereafter). This approach eliminates, or at least minimizes, the effects of regulatory influences.
The paper contains four sections each directed at one of the following questions:
(1) What factors affected the early development of pension ac-counting theory and practice?
(2) What theories existed to guide measurement and disclosure?
The author wishes to acknowledge the helpful comments of Maurice S. Newman, Paul Garner, and Rick Turpen. The research was supported by a grant from Peat, Marwick, Mitchell and Company.