Rational Prediction Of Future Pension Expense: A Simulation Approach

Abstract

<p class="MsoBodyText" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">Because future pension expense can have a material influence on a firm’s future earnings, financial analysts are faced with the difficult task of forecasting its impact.<span style="mso-spacerun: yes;">  </span>The purpose of this paper is to demonstrate a model that can be used with a simulation approach to predict future pension expense and its associated uncertainties.<span style="mso-spacerun: yes;">  </span>Because of the importance and complexity of the pension expense component in the estimate of future earnings, a simulation model acts as a powerful analytical tool that can give the analyst greater confidence as to the magnitude and variability of future pension expense.</span></span></p>