Staff members at the U.S. Securities and Exchange Commission are suggesting that public companies should include pension plan results in their consolidated financial results.[@@]

Commission staff members have discussed pension reporting in a new report on ways to improve accounting for derivatives, leases and pensions.

Congress requested the report in the Sarbanes-Oxley Act of 2002, and SEC staff members based the results in part on a study of 100 big U.S. public companies and 100 smaller companies.

The authors of the report contend that current pension accounting rules that let public companies smooth plan earnings from one year to the next give the public a false impression of companies’ finances. The companies studied for the report said they had about 12% more assets than they need to fund their plans, but the SEC believes plan asset levels are about 11% lower than they ought to be, according to the report authors.

“The [SEC] staff believes that a project that would reconsider the accounting for defined-benefit pension plans is warranted,” the report authors write.

Project topics might include valuation of assets, deferral of actuarial gains and losses, and consolidation of plan financial results with other company financial results, the authors write.

“Given the fact that the plan sponsor generally controls and is subject to the vast majority of the risks and rewards of the pension plan, there is not an obvious conceptual reason why the plan should not be consolidated,” the authors write.

The report is on the Web at http://www.sec.gov/news/studies/soxoffbalancerpt.pdf