1、Session 39 Workshop:Analyzing Defined Benefit Pension Plans & Postretirement Benefits Greg CliftonVP/Senior AnalystMoodys Investors Service1Rating Methodology2Cash Flow ConsiderationsPension plansUnderstand contribution requirementsRough estimate can be made with SFAS 87 information Due to undisclos

2、ed credits, some companies may not face large contribution requirements for several yearsCan be offset by contributing stock OPEBPrimary focus on benefits paid (recorded on “pay-as you-go basis)Can obtain benefits paid information in the rollforward of the APBOCan analyze growth in: Net periodic pos

3、tretirement costBenefit paymentsCan use above rates to project future benefit payments3Balance SheetAdjustments:For pensionsRecorded Debt Per Balance Sheet+Add: Off-balance sheet liabilities (e.g., lease obligations, guarantees)+Add: Net underfunded PBO from notes to financial statements= Adjusted D

4、ebtOPEB may include the underfunded amount of the APBO in adjusted debt in certain circumstances4Income StatementAs Adjusted By Moodys:Service cost (no adjustments)Interest cost (adjusted only if Moodys disagrees with discount rate)Amortization of prior service cost (Not used)Recognized net actuaria

5、l gains (Not used)Amortization of transition asset (Not used)Actual losses on plan assets, or Actual gains up to the amount of interest cost= Adjusted Net Periodic Pension/OPEB cost5Financial Statement Information A Closer Look6Pension Plan Funded StatusFinancing cost of the planChanges in actuarial

6、 assumptions (i.e. attrition, retirement, mortality, discount and comp. Increase rates)PBO: Projected benefit obligation. PV of benefits earned to date incl. projected salary increasesEconomic position of the firms pension plans = Fair value of plan assets - PBOActuarial present value of benefits ea

7、rned during the current period (by virtue of having worked another year)7BS and IS ReportingEconomic position of the firms pension plans = Fair value of plan assets - PBONet balance sheet entry for plan statusIf plan level pension liability (1,000)%Net income (loss)$ 1,730$ (338)Total Net Periodic P

8、ension Income (28) (145)Service Cost (242) (219)Pension interest cost (773) (748)Actual gains (losses) 773 (1,230)Net income (loss), as adjusted$ 1,460$( 2,680)% Net Income (loss) changed (15.6)% (693)%14How Might The Following Actions Be Viewed By Moodys?Discretionary excess pension contributionsIncurring