re: Random Money/Business/Finance Thoughts Thread

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I haven't looked into HP in a while. The expected earnings growth isn't exactly stellar and justifies a sub-10 P/E ratio, which could still provide upside if earnings increase, but it's certainly not a no-brainer or anything.

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Recognition of actuarial gains and losses (remeasurements): ‘Actuarial gains and
losses’ are renamed ‘remeasurements’ and will be recognized immediately in ‘other
comprehensive income’ (OCI). Actuarial gains and losses will no longer be deferred
using the corridor approach or recognized in income; this is likely to increase balance
sheet and OCI volatility. Remeasurements recognized in OCI will not be recycled
through profit or loss in subsequent periods.

? Recognition of past service cost/curtailment: Past-service costs will be recognized
when a plan is amended; unvested benefits will no longer be spread over the vesting
period. Curtailments now only occur when an entity reduces significantly the number of
employees. Curtailment gains/losses are accounted for as past-service costs.

? Measurement of benefit expense: Annual expense for a funded benefit plan will include
net interest expense or income, calculated by applying the discount rate to the net
defined benefit asset or liability. This will replace the finance charge and expected
return on plan assets, and will increase benefit expense for most entities. There will be
no change in the discount rate, which is a high-quality corporate bond rate where there
is a deep market in such bonds, and a government bond rate in other markets.

? Presentation in income statement: There will be less flexibility in income statement
presentation. Benefit cost will be split, either in the income statement or in the notes,
between (1) the cost of benefits accrued in the current period (service cost) and benefit
changes (past-service cost, settlement and curtailment) and (2) finance cost/income.

? Disclosure requirements: Additional disclosures are required to present the
characteristics of benefit plans, the amounts recognized in the financial statements, and
the risks arising from defined benefit plans and multi-employer plans. The objectives
and principles underlying disclosures are provided; these are likely to require more
extensive disclosures and more judgment to determine what is required.

Distinction between ‘short-term’ and ‘other long-term’ benefits: The distinction
between short- and long-term benefits is based on when payment is expected, not when
payment can be demanded. A long-term benefit liability could therefore be presented as
current if the entity expects to settle it after more than one year, but does not have the
unconditional ability to defer settlement for more than one year.

? Treatment of expenses and taxes relating to employee benefit plans: Taxes related to
benefit plans should be included either in the return on assets or the calculation of the
benefit obligation, depending on their nature. Investment management costs should
reduce the actual return on assets. Other expenses should be recognized as incurred.
This should improve comparability but might complicate the actuarial calculations.

? Termination benefits: Any benefit that requires future-service is not a termination
benefit. This will reduce the number of arrangements classified as termination benefits.
A liability for a termination benefit is recognized when the entity can no longer
withdraw the offer of the termination benefit or recognizes any related restructuring
costs. This might delay the recognition of voluntary termination benefits.

? Risk or cost sharing features: The measurement of obligations should reflect the
substance of arrangements where the employer’s exposure is limited or where the
employer can use contributions from employees to meet a deficit. This might reduce the
defined benefit obligation in some situations. Determining the substance of such
arrangements will require judgment and significant disclosure.

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