Summary
Northrop Grumman Corporation (NOC) announced a significant change in its accounting method for pension and other post-retirement benefit (OPEB) plans, effective for results beginning December 31, 2018. The company is adopting the mark-to-market method for recognizing actuarial gains and losses, moving away from the previous amortization approach. This change aligns with U.S. Generally Accepted Accounting Principles (GAAP) and is considered a more preferable accounting method. While this shift is primarily an accounting adjustment and will not impact the company's cash flows, pension funding obligations, or participant benefits, it is expected to influence pre-tax earnings. Investors should note that the full impact on earnings, along with recast prior period financial statements, will be provided when Northrop Grumman reports its fourth quarter and full year 2018 results. This change aims to provide more current and transparent reporting of pension-related financial performance.
Key Highlights
- 1Northrop Grumman is changing its accounting method for pension and OPEB actuarial gains and losses.
- 2The company will adopt the mark-to-market method, recognizing these gains/losses in the year they occur.
- 3This change is effective for financial results beginning December 31, 2018.
- 4The accounting change is considered more preferable under U.S. GAAP.
- 5This change will not affect cash flows, pension funding requirements, or participant benefits.
- 6The adoption of this method is expected to impact pre-tax earnings.
- 7Prior period financial statements reflecting the change will be provided with Q4/FY 2018 earnings.