UPS: New Accounting Method Will Hit Q4 Profit

[Stocks-to-Watch]

UPS (UPS) announced on Friday that it will change its the methods it uses to account for pension costs. The shift to a mark-to-market style will result in an $827 million pretax charge that will affect fourth quarter earnings.

UPS will account for pension gains and losses each year in its fourth quarter report.

“This policy provides greater transparency to the company’s underlying operating results,” said CFO Kurt Kuehn. “I want to emphasize that this change has no impact on benefits for plan participants or UPS cash flow.”

Some accountants consider mark-to-market accounting more transparent way of accounting for pension costs, although the method can result in more earnings volatility, the Wall Street Journal notes.

UPS shares were up 1% this afternoon. The company is scheduled to report fourth quarter earnings on Tuesday. The accounting change could strip 51 cents from EPS, but lift adjusted earnings by 3 cents per share. Applied retroactively, the change reduces 2009 EPS by 18 cents and 2010 EPS by 15 cents.



Original Article Source by Barrons.com