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What SSAP 24 can tell us about accounting quality

Published online by Cambridge University Press:  14 November 2011

P. J. Sweeting
P. J. Sweeting*
Affiliation:
Professor Paul Sweeting, School of Mathematics, Statistics and Actuarial Science, The University of Kent, Canterbury, Kent, CT2 7NZ
*
Contact addresses P. J. Sweeting, F.I.A. J.P. Morgan, Asset Management, Finsbury Dials, 20 Finsbury Street, London, EC2Y 9AQ U.K. Tel: +44(0)20 7742 0501. E-mail: [email protected]
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Abstract

Statement of Standard Accounting Practice (SSAP) 24 required, for the first time, particular levels of disclosure in relation to firms’ pension arrangements. Whilst this was a major step forward, it allowed a significant degree of discretion. This discretion meant that SSAP 24 was an observable measure of the quality and quantity of accounting disclosure for firms. This information can be used to determine the types of firms that give less information or use weaker assumptions. In my analysis, I find some evidence that large firms give more complete disclosures, but also that they are more able to exert influence on their actuaries to use weaker assumptions for the valuation of pension scheme liabilities. There is also some evidence that more profitable firms disclose less, so firms with a higher average tax rate might want to overfund their pension scheme. Finally, there is evidence that highly levered funds are less likely to give complete disclosure, and that when they do disclose their assumptions, they use a weaker basis.

Keywords

Statement of Standard Accounting PracticeSSAP 24Accounting DisclosureValuation of Pension Scheme LiabilitiesDisclosure Assumptions
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 16 , Issue 3 , September 2011 , pp. 723 - 775
Copyright
Copyright © Institute and Faculty of Actuaries 2011

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