Emerson Electric changes pension accounting to mark-to-market and recasts past results

Emerson Electric Co. (EMR) said Tuesday in a regulatory filing that it has changed how it accounts for actuarial gains and losses on its defined benefit pension and other postretirement benefit plans. The change is effective for the fiscal year ended Sept. 30, 2026.

Under the new method, known as mark-to-market accounting, those gains and losses are recognized in earnings in the period they arise. Previously, the company recorded them in accumulated other comprehensive income and amortized part of them into benefit cost in later periods.

Beginning in the fourth quarter of fiscal 2026, the company will recognize the gains and losses once a year, based on the plans' Sept. 30 annual measurement date. The annual adjustment will mainly reflect changes in discount rates, returns on plan assets and other actuarial assumptions.

The company said it believes the new method is preferable under U.S. generally accepted accounting principles because it recognizes the effects of current economic conditions and plan experience in the period they arise.

The company expects a pretax gain of less than $5 million from the fourth-quarter adjustment, based on its current actuarial assumptions and estimated plan asset returns. It said actual results could differ from those preliminary estimates.

The company will exclude the annual adjustment from adjusted earnings per share. It said the adjustment depends on market conditions and actuarial assumptions and is not indicative of underlying operating performance.

The change increased earnings for the nine months ended June 30, 2026 by $8 million, or $6 million after tax and $0.01 per share. That benefit came from reversing amortized losses out of accumulated other comprehensive income.

The change must be applied retrospectively to all periods presented. Exhibit 99.1 contains recast results for fiscal 2024 and 2025, the nine months ended June 30, 2026, and quarterly results for fiscal 2025 and the first three quarters of fiscal 2026.

Nine-month diluted earnings per share are now $3.46, up from $3.45 previously reported. The company said the recast information is unaudited and does not restate its previously issued financial statements.

The expected fourth-quarter gain and the nine-month benefit were not reflected in the company's previously announced fiscal 2026 outlook. The company said the filing does not otherwise reaffirm or update that outlook.

The company said the adjustment will be reported in consolidated results but not allocated to its reportable segments. It will have no impact on total cash flows, the funded status of its plans, funding requirements or benefits payable to participants.