Not long ago, I was listening to CNBC and they were interviewing a union representative who claimed that their company had wronged the employees by not funding the pension in over three years. It turns out that the company had emerged from bankruptcy and could not make those contributions because they were not profitable yet. They had previously given into union demands, and there just wasn't any money left over. Okay so let's talk about all this shall we?
What happens when the legacy costs exceed the profit of the company? Those legacy costs should be attributed to past periods, not to the current quarter of earnings. To do anything else with them would be disingenuous and really bad accounting. Nevertheless, the money has to come from somewhere, and in despite what you might think, it doesn't grow on trees, although we have many socialist left-leaning politicians which would have you believe otherwise.
Manufacturing (dot) net surely had an interesting article, similar to one I'd recently read in CFO magazine on how to account for legacy pension costs. This newest article was titled; "Boeing Considering How To Account For Pensions," published on November 13, 2012, which noted that the Boeing Company was;
"Studying different ways to account for pension expenses, which reduced the aerospace company's 3rd quarter earnings," and that; "The options under review include changing to mark-to-market accounting, which would take into consideration changes in the value of pension assets and obligations. It could, however, introduce more swings in earnings reports because the current accounting method spreads out gains and losses from assets over several years."
Okay so, not only does this effect manufacturing businesses and make it a nightmare for that sector, but we already know the challenges it is causing in the public sector for municipalities, states, military, and the Federal Government. And not just here, think about the aging populations of Japan and Europe too? This demographic problem is exacerbating the challenges. People are living longer, and health care costs keep increasing, and so to do all the legacy costs.
If someone retires at age 60, but lives to be 100 years old, they will be taking money out for 40 additional years, there's a good chance they didn't even work that long. Consider if you will the reality that Social Security when it first came into fruition was only $1700 per person per lifetime. Today, people are getting that much every month, and for as much as 40 or more years. Worse, back then there were 17.1 people paying in for every person collecting the money. Today, we can move that decimal point over, and there are only 1.7 people working for every person taking out.
Boy, I hate to use a socialist left-leaning phrase here, but quite frankly; that's just unsustainable.
Indeed, it is my sincere hope that you will please consider all this and think on it.
What happens when the legacy costs exceed the profit of the company? Those legacy costs should be attributed to past periods, not to the current quarter of earnings. To do anything else with them would be disingenuous and really bad accounting. Nevertheless, the money has to come from somewhere, and in despite what you might think, it doesn't grow on trees, although we have many socialist left-leaning politicians which would have you believe otherwise.
Manufacturing (dot) net surely had an interesting article, similar to one I'd recently read in CFO magazine on how to account for legacy pension costs. This newest article was titled; "Boeing Considering How To Account For Pensions," published on November 13, 2012, which noted that the Boeing Company was;
"Studying different ways to account for pension expenses, which reduced the aerospace company's 3rd quarter earnings," and that; "The options under review include changing to mark-to-market accounting, which would take into consideration changes in the value of pension assets and obligations. It could, however, introduce more swings in earnings reports because the current accounting method spreads out gains and losses from assets over several years."
Okay so, not only does this effect manufacturing businesses and make it a nightmare for that sector, but we already know the challenges it is causing in the public sector for municipalities, states, military, and the Federal Government. And not just here, think about the aging populations of Japan and Europe too? This demographic problem is exacerbating the challenges. People are living longer, and health care costs keep increasing, and so to do all the legacy costs.
If someone retires at age 60, but lives to be 100 years old, they will be taking money out for 40 additional years, there's a good chance they didn't even work that long. Consider if you will the reality that Social Security when it first came into fruition was only $1700 per person per lifetime. Today, people are getting that much every month, and for as much as 40 or more years. Worse, back then there were 17.1 people paying in for every person collecting the money. Today, we can move that decimal point over, and there are only 1.7 people working for every person taking out.
Boy, I hate to use a socialist left-leaning phrase here, but quite frankly; that's just unsustainable.
Indeed, it is my sincere hope that you will please consider all this and think on it.
No comments:
Post a Comment