$827m cost for UPS move to yearly pension fund reporting

UPS is set to take a $827m hit to its fourth quarter results after taking the decision to change its accounting procedures for its pension and retiree benefit funds. The company is following a recent trend among a number of major corporations in the United States in moving to record the gains and losses incurred by its pension funds within each year’s accounts, rather than spreading the impact out over several years.

The world’s largest package delivery firm said today that the changes would mean “simpler, more transparent” financial reporting, in an approach that was preferred under US generally accepted accounting principles.

UPS said the change would not affect pension plans for its staff members, or company cash flow.

But, making the move to yearly reporting for pension fund performance will cut diluted earnings per share by 51 cents in the fourth quarter of 2011, and 41 cents for the year as a whole, although adjusted diluted earnings per share are expected to rise three cents in Q4 and 12 cents for the full year.

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

UPS is set to announce its fourth quarter results on Tuesday (31 January).