Aurora Borealis
1 January 2013 Financial Analysts Journal Volume 69, Issue 1

Logical Implications of the GASB’s Methodology for Valuing Pension Liabilities

  1. Robert Novy-Marx

The marginal valuation of assets can be negative under the Governmental Accounting Standards Board’s methodology for valuing pension liabilities. In such cases, a plan can improve its GASB funding status by literally burning money. GASB accounting also gives different “valuations” for the same assets and liabilities when they are partitioned differently among plans. Finally, the methodology is exactly equivalent to fairly valuing plan liabilities but accounting for stocks at more than twice their traded prices.

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