The Role of Accounting Policy Choice in Costly Contracts : Determinants of the Use of Pension Accounting Standards by Australian Pension Plans

This paper develops the foundations for a positive theory of accounting policy choice in insurance-based contracts. I examine form and content implications of the Mayers and Smith (1981) positive theory of insurance (PTI) and then test proxies and empirical surrogates in the setting of the voluntary use of pension acounting standards (PAS) by Austalian pension plans. PAS can be based on either Australian Accounting Standards (AAS) or industry recommended guidelines (IRG). The voluntary use of AAS-based PAS is associated with various contracting related incentives related to the demand and supply of retirement income insuance and political factors which differ between individual and group-based pension plans