Furthermore, expanded disclosures of other important statistical and financial data, as discussed, allow users to understand better the extent and effect of an employer's undertaking to provide employee pensions and related financial arrangements. The one financial reporting area the author believes can be improved is in narrowing the range of actuarial assumptions relating to rates of discount, rates of return on assets, and rates of compensation increase. Currently each company, and its actuaries, makes its own analysis and determination as to what rates to employ for these variables in the very important present value calculations. As a result, there is perhaps a wider dispersion of rates used than there should be, assuming improved comparability, and hence, usefulness, is a desirable goal. One example of selection of rates will suffice.
Discount rates are to reflect the rates at which pension benefits can be effectively settled.
The annual establishing of reasonable ranges for rates of return on assets and rates of compensation increase appears feasible. Such ranges could be established by a committee of the Financial Executives Institute working with a group of actuaries. Table 1-4 Omitted Robert H. Mills, PhD, CPA, has been a Professor of Accounting at Lehigh University, Bethlehem, PA, for 25 years. Dr. Mills has previously contributed articles to The CPA Journal and other professional periodicals.