nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2016‒02‒04
four papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Marking to Market versus Taking to Market By Guillaume Plantin; Jean Tirole
  2. Now is the Time to Add Retirement Accounts to Social Security: The Guaranteed Retirement Account Proposal By Teresa Ghilarducci; Zachary Knauss; Bridget Fisher
  3. GASB 68: How Will State Unfunded Pension Liabilities Affect Big Cities? By Alicia H. Munnell; Jean-Pierre Aubry
  4. Inadequate Retirement Account Balances for Families Nearing Retirement By Teresa Ghilarducci; Joelle Saad-Lessler; Bridget Fisher; Siavash Padpour

  1. By: Guillaume Plantin (Département d'économie); Jean Tirole (Toulouse School of Economics (TSE))
    Abstract: While the debate on cost and market-value accounting has been raging for years, economists lack a framework allowing a comparison of their relative merits. This paper considers an agency model in which the measurement of an asset can be based on public market data (marking to market) and/or on the realization of its value through costly resale to an informed buyer (taking to market). At the optimal contract, noisier market data lead to cost accounting and gains trading (selling winners/keeping losers) whereas accurate data naturally favor market-value accounting. The quality of market data and the magnitude of resale costs both depend on the volume of transactions, and therefore on accounting rules. The paper studies the mutual feedback between individually optimal accounting rules and asset market liquidity. This equilibrium approach reveals a socially excessive use of market-value accounting that dries up market liquidity and reduces the informativeness of price signals.
    Keywords: Cost and market value accounting; Agency; Gains trading; Equilibrium accounting rules
    JEL: D82 M41 M52
    Date: 2015–11
  2. By: Teresa Ghilarducci; Zachary Knauss; Bridget Fisher (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: Despite billions in tax breaks to incentivize retirement savings, almost half of the American workforce does not have a retirement plan. Without safe, effective accounts to save consistently for retirement, older workers face the increasing likelihood of experiencing downward mobility in retirement. Rather than relying on families and social spending to provide for the growing numbers of vulnerable seniors, we need comprehensive retirement reform to ensure retirement income security. This includes creation of Guaranteed Retirement Accounts (GRAs) added on to Social Security. A GRA is a mandated, professionally-managed retirement account – a hybrid between a defined benefit pension and a 401(k)-type defined contribution plan.
    Keywords: Retirement, 401(k), GRA, Social Security
    JEL: H55 J26 J32 D63 E21
    Date: 2015–06
  3. By: Alicia H. Munnell; Jean-Pierre Aubry
    Abstract: Beginning in 2015, under new provisions of the Governmental Accounting Standards Board (GASB), the unfunded actuarial accrued liability for public pension plans moved from the footnotes of financial statements to the balance sheets of employers. In ad­dition, localities that participate in “cost-sharing” state plans are now required to report their share of that plan’s unfunded liability on their books. This brief explores the implication of this latter shift. The discussion proceeds as follows. The first sec­tion describes the new GASB provisions. The second section illustrates, in detail, our method for applying GASB 68. The third section presents the estimated impact of GASB 68 on the 92 cities in our sample that are participating in cost-sharing state plans, as well as the overall impact on our full sample of 173 cities. The fourth section compares individual results for se­lected cities. The final section concludes that forcing cities to recognize their share of the state’s unfunded liability may lead them to take more interest in having these liabilities paid off.
    Date: 2016–01
  4. By: Teresa Ghilarducci; Joelle Saad-Lessler; Bridget Fisher; Siavash Padpour (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: Americans nearing retirement do not have enough savings to support their standard of living in retirement. Over 28% of American families ages 50-64 have nothing saved for retirement. The average total balance in all retirement accounts is $150,000, an amount considered inadequate for retirement security.
    Keywords: Retirement, 401(k)
    JEL: H55 J26 J32 D63 E21
    Date: 2015–06

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