On the value relevance of SFAS No. 158

Abstract After considerable discussion and some controversy, Statement of Financial Accounting Standards No. 158 entitled, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” was implemented in 2006. An important goal of these standards was to enhance financial reporting transparency for defined benefit pension plans ( FASB, 2006 ). This study evaluates how well SFAS No. 158 achieved its objective. In particular, we compare the respective pre and post-SFAS 158 incremental value relevance of the balance sheet and income statement for firms with defined benefit pension plans (DBPP). Results suggest that the value relevance of book value (net income) increased (decreased) for DBPP firms after the implementation of SFAS No. 158.