AT&T To Take $2.7 Billion Charge In Q4

DALLAS (AP) - Under a new accounting scheme announced Thursday, AT&T Inc. plans to take a pre-tax charge of $2.7 billion in the fourth quarter to account for gains and losses in projected costs for pensions and other retirement benefits.

The Dallas-based phone company said the charge amounts to 28 cents per share.

Previously AT&T amortized changes in projected pension and retirement benefits costs over several years. Starting with its report for the fourth quarter, which is due Jan. 27, it will recognize these changes in full each year in the fourth quarter.

Chief Financial Officer Rick Lindner said the new policy "provides a much simpler and easier way for investors to understand our benefit accounting and our benefit costs."

The charge to the fourth quarter's results is caused mainly by last year's low interest rates on corporate bonds, which affect the projected value of AT&T's fund. That was offset somewhat by higher-than-expected returns on fund assets and by lower retiree health-care costs. AT&T has implemented changes to its plans in recent years to rein in growing costs.

The accounting change does not affect AT&T's cash flow or pension funding requirements. Its pension and post-retirement benefit obligations totaled $87 billion at the end of 2009, the latest figure reported. The plan assets were $58.4 billion, though the difference between the figures isn't indicative of AT&T's ability to pay benefits.

Shares of AT&T fell 2 cents to $28.02 in morning trading.

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