Abstract
The financial and economic consequences of the Financial Accounting Standards Board's (FASB) new Preliminary Views on employers' accounting for pension costs are analyzed and evaluated. Criticisms directed at the FASB's proposals fall into 2 categories: 1. The proposals do not reflect economic reality. 2. The proposals will cause changes in the nature of existing pension plans and will have severe economic and financial consequences for capital markets, firms, and plan participants. The FASB undertook a field test of 32 companies to assess the financial consequences of its proposals. One result was that most companies would have a net pension liability. An experiment is constructed that includes a much larger sample - 190 companies - and a shorter data period - 1979-1981 instead of 1979-1982. Debt-to-equity results indicate that the impact of the FASB's proposals on risk and at the macroeconomic level is insignificant in most cases. Social, theoretical, and legal objections to the proposals also seem exaggerated.