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Gov't Reporting Standards Could be Boon for Businesses

New reporting standards concerning government pension liabilities could...

As state governments across the country prepare to adopt new financial reporting guidelines set by the Governmental Accounting Standards Board, some companies are expecting to see higher levels of investor interest in their corporate bonds, Compliance Week reported.

The new standards would require state-run pension funds to disclose liabilities from underfunded pensions, something that could make government bonds a less appealing prospect for investors, benefiting corporate bonds, suggested Bruce Pounder of accounting education firm Loscalzo Associates.

“The new GASB standards could depress the market value of bonds that have been issued by state and local governments, especially once the standards become fully effective,” he told CW. “Consequently, corporations may enjoy a lower cost of debt capital if there is a significant flight to quality in the wake of the new GASB standards.”

The new government rules could draw attention to pension funding among private corporations, the source noted. As the Financial Accounting Standards Board has readied itself for a merge with international standards, private pension accounting has taken a back seat, but the increased awareness of state pensions could provide the spark to reignite the issue.