Rules versus principles-based pension accounting standards: An analysis of comparability

Motivated by Schipper and Vincent’s (2003) comment that comparability in financial reporting is under-researched, this paper analyses the comparability construct in the context of pension accounting. In practice, compromises or rules introduced into pension accounting standards are not based on principles but result from political bargaining (Daley and Tranter, 1990). Current pension accounting standards in the USA, Australia and the international pension accounting standard are compared using a "theoretical" benchmark to present the economic substance of the transaction. To develop the theoretical benchmark, Barth and Clinch's (1996) use of Ohlson's (1989) clean surplus model is adapted to articulate the sponsor’s profit and loss and balance sheet so that compromises are highlighted. This paper concludes that a principles-based approach that emphasises the economic substance and clean surplus approach need not necessarily compromise comparability.