Abstract
In this paper, we focus on the disclosure of pension liabilities for entities referred to in Italian Legislative Decree 30 June 1994 no. 509 (also called “old funds” for professionals), which is crucial for a suitable communication. After illustrating the limits of current statutory financial statements’ in relation to the information they provide on pension benefit obligations, we propose three potential solutions to bridge the gap. Each of these proposals helps ensure the completeness and clarity of financial reporting and improves upon the informational capacity and quality of disclosure. In our opinion, one of these approaches, in particular, would be preferred because of its ease of adoption. Indeed, the disclosure in the explanatory notes allows for the quantification of pension benefit obligations, and hence a more proper evaluation of entities in the medium/long- term, with no impact on annual economic-financial results as reported in the balance sheet and the income statement.
Highlights
As evidenced by Chiacchio and Tagliapietra (2018) the Italian debate on the pension system predominantly focuses on short-term aspects, neglecting relevant longer-term fundamentals
After having pointed out that the pension benefit obligations (PBOs) are currently not properly reported in either the balance sheet or in the explanatory notes, our research question is “how can financial statements be improved with specific regard to future pensions that will become due in consideration of contributions paid and recorded in the asset section?”
The analysis pointed out that PBOs are not accounted for either in the financial statements or in the technical budget, undermining their disclosure (Andrietti, 1995; Morrone & Angrisani, in press), which is critical for multiple stakeholders and may impact sustainability evaluation (Angrisani, 2008; Angrisani & Di Palo, 2019)
Summary
As evidenced by Chiacchio and Tagliapietra (2018) the Italian debate on the pension system predominantly focuses on short-term aspects, neglecting relevant longer-term fundamentals. 509/94, the so-called “old funds” and pension schemes ex Legislative Decree n. The aim of this paper is to analyze how “old funds” report pension benefit obligations (PBOs) (Note 1) in their financial statements, and to further propose potential approaches to better represent them. Within this scope, and after having pointed out that the PBOs are currently not properly reported in either the balance sheet or in the explanatory notes, our research question is “how can financial statements be improved with specific regard to future pensions that will become due in consideration of contributions paid and recorded in the asset section?”
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