8-KOther EventsExhibits & Filings

VERIZON COMMUNICATIONS INC 8-K Report, Corporate Update (Jan 21, 2011)

Filed January 21, 2011For Securities:VZ

Summary

Verizon Communications Inc. has filed an 8-K report detailing a significant change in its accounting methodology for pension and other post-employment benefits, effective for the fourth quarter of 2010. This change aims to enhance transparency by immediately recognizing actuarial gains and losses in operating results, rather than amortizing them over time. Additionally, Verizon will now use the actual fair value of plan assets instead of a market-related value for calculating the expected return on assets. This shift is expected to provide a clearer picture of the impact of current economic conditions on the company's financial performance. To facilitate investor understanding and analysis, Verizon has also retrospectively applied these changes and provided unaudited historical financial information for the past seven quarters. This includes adjusted consolidated and wireline segment data, allowing investors to evaluate the impact of the new accounting method on historical performance. The report indicates that while service cost and prior service cost amortization will continue to be allocated to operating segments, interest cost, expected return on assets, and actuarial gains/losses will now be reported at the Corporate level.

Key Highlights

  • 1Verizon is changing its accounting method for pension and other post-employment benefits, effective Q4 2010.
  • 2The company will now immediately recognize actuarial gains and losses in operating results, improving transparency.
  • 3Verizon will use the actual fair value of plan assets for expected return on assets, replacing the previous averaging technique.
  • 4These accounting changes have been applied retrospectively, with prior periods adjusted.
  • 5Historical consolidated and wireline segment financial information for the past 7 quarters is being provided to aid investor analysis.
  • 6Certain benefit costs (interest cost, expected return on assets, actuarial gains/losses) will now be recorded at the Corporate level, not allocated to operating segments.

Frequently Asked Questions

Verizon is changing its accounting for pension and other post-employment benefits to immediately recognize actuarial gains and losses in operating results, rather than amortizing them over time. They are also switching to using the actual fair value of plan assets for calculating the expected return on assets.

The primary reason cited is to improve the transparency of Verizon's operational performance by more directly reflecting the impact of current economic and interest rate trends on its pension plan investments and assumptions.

This change will lead to potentially more volatility in reported operating results as actuarial gains and losses will be recognized immediately. It also changes how certain benefit costs are allocated, with interest cost, expected return on assets, and actuarial gains/losses now being reported at the Corporate level.

Yes, Verizon has applied this change retrospectively, meaning prior periods have been adjusted to conform to the new accounting method. They have also provided historical financial information for the past seven quarters reflecting these adjustments.