New rule proposed for government bankruptcies

According to Pensions and Investments, GASP has proposed a new accounting rule for governments who are filing for bankruptcy:

For pension and other post-employment benefits, a government could “reject” its plans and related obligations, the exposure draft states. “In that case, the rejected unfunded benefit obligations become general unsecured debt of the government” and the plan participants “would need to present their claims in the creditor’s committee together with all other general creditors of the government” for consideration of payment.

Alternatively, a government would not reject the obligations but bargain to reduce them, according to the statement from the Governmental Accounting Standards Board.

Read the full article here.