Using Agency Theory as an Organizing Principle for Pension Accounting

Gerald H. Lander is Professor of Accounting, College of Business at the University of South Florida. Alan Reinstein is Professor of Accounting, School of Business Administration at Wayne State University. Augustin K. Fosu is an Associate Professor of Economics, School of Business Administration at Oakland University

An Evaluation Of Agency Theory Influence In Pension Accounting

The Financial Accounting Standard Board Standard No. 87 supersedes all other methods of accounting for pensions. However, many accountants think that this statement will also be superseded eventually since it contains several theoretical inconsistencies. The purpose of this article is first to apply agency theory to the determination of pension benefits, in order to show that pension costs represent a sharing of future cost savings in the employee-employer relationship. Some implications of the derived model are then applied to the provisions of SFAS No. 87. This model can thus be used to develop a consistent economic theory for pension accounting