Does recognition versus disclosure of pension liabilities affect credit ratings? Evidence from Japan

Masaki Kusano

Journal of International Accounting, Auditing and Taxation, 2023, vol. 50, issue C

Abstract: Whether credit market participants process disclosure and recognition of pension information differently has not been fully explored. To fill this gap, this study investigates whether the change in a pension accounting standard related to the recognition rule influences firms’ credit risk in Japan. Statement No. 26, Accounting Standard for Retirement Benefits, stipulates that firms recognize previously disclosed pension information on the balance sheet. Employing the implementation of Statement No. 26, I explore how differences between disclosed and recognized pension liabilities affect credit ratings. I find that off–balance sheet pension liabilities are associated with credit ratings prior to Statement No. 26. I also find similar relations between disclosure versus recognition of pension liabilities and credit ratings. When firms have a small pension plan deficit, off–balance sheet pension liabilities provide risk-relevant information, and the risk relevance of disclosed and recognized pension liabilities is statistically similar. My overall results suggest that mandating pension recognition does not affect the credit risk assessment by credit rating agencies.

Keywords: Recognition versus Disclosure; Pension Accounting; Credit Ratings; Pension Plan Deficit; Japan (search for similar items in EconPapers)
JEL-codes: M41 M48 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1061951823000034
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Does Recognition versus Disclosure of Pension Liabilities Affect Credit Ratings? Evidence from Japan (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:50:y:2023:i:c:s1061951823000034

DOI: 10.1016/j.intaccaudtax.2023.100524

Access Statistics for this article

Journal of International Accounting, Auditing and Taxation is currently edited by R. Larson

More articles in Journal of International Accounting, Auditing and Taxation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().