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Archive for December 9th, 2008

FYE 9/30/08 Key Economic Assumptions

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FYE 9/30/08 - Key Economic AssumptionsFor S&P 500 companies with fiscal year ending September 30, the weighted average discount rate used to measure global defined benefit pension plans as of 9/30/2008 rose to nearly 6.75%, as shown for fiscal years ending 2004 through 2008 by the red diamonds on this chart. The higher pension discount rate assumption, reflecting the widening spread between higher interest rates on high-quality long-term corporate bonds versus the low yields on U.S. Treasury securities, tempered the increase in pension obligations, partially offsetting large pension asset losses during 2008. As previously observed, the net result was a lower erosion in pension funded status than might have been suggested by appraisal of the negative pension fund investment in isolation.

Whereas GAAP as prescribed by SFAS 87 leads to volatile discount rates used to measure pension obligations, the same accounting standard leads to a more stable assumption for the expected rate of return on pension assets. For the subset of S&P 500 companies with fiscal years ending September 30, the weighted average assumption for global pension plans was increased slightly for the fiscal year ending in 2008, but has remained relatively stable near 8.00%, as shown for fiscal years 2004 through 2008 by the blue squares on this chart. Whereas this expected rate of return assumption is used to measure a key component of pension cost for the year, the actual aggregate rate of return on pension assets for 2008 was almost the exact opposite, a loss of about 7.90%, as previously observed.

The results observed for the FYE 9/30 subset are currently expected to be representative of the 2008 fiscal year for the full S&P 500 universe, the overwhelming majority of which are companies with fiscal years ending December 31: higher discount rates for the measurement of year-end pension obligations, versus relatively stable expected rates of return on pension assets for determination of pension costs during the year.

(Remember, as I’ve previously disclaimed, posts such as this represent efforts of my favorite pastime. My formal work does not involve any of this, and none of it represents any position or comment that should in any way be attributed to my employer. Likewise, as always, it represents general personal impressions and should not be treated or used as formal professional advice.)

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Written by macheide

9 December 2008 at 3:14 pm

Posted in άctuary

Temporarily Anti-Social

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What social network do you belong to: MySpace (1) or Facebook (2)?


Response: 2 Only for th brief breath it should take until there’s something (not myspace) better.

I only let myself get dragged into Facebook out of wanting a plausible micro-blogging alternative to the censor-happy Twitter. Alas, beneath all the hoopla pop, Facebook is as weak on its micro-blogging as it is on all else, so much so that recently it even attempted to buy out Twitter, after the style of Microsoft vs Yahoo: as in, if you can’t program it adequately on your own, then buy (or steal) it; while the intended victim gnaws on its own entrails.

But I’m only visiting, not moving in. Facebook is already fast going in the ditch the suicidal LiveJournal has been digging: instead of reaching up and out from a smooth college culture to the professional and sophisticated spheres, Facebook is headed for turning into a MySpace wannabe: a cute little playground for the kiddies, but not where anyone over the age of 14 would care to admit to belonging, unless you’re they to watch over your children.

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Written by macheide

9 December 2008 at 9:38 am

Posted in strawpoll