Details Emerge on FASB Pension Disclosure Proposal

November 26, 2003 ( - The Financial Accounting Standards Board (FASB) has voted to require US companies to disclose the investment strategies used in their defined benefit plan.

Expected later this year, the new rule would require companies to disclose publicly the proportion of stocks, bonds and other investments including real estate and private equity they hold in their pension portfolios.  Also approved was a requirement that companies estimate and disclose pension benefits to be paid out to employees for each of the next five years.

The decisions were made Wednesday at the Norwalk, Connecticut-based FASB’s weekly board meeting, in what was to have been the final meeting before the full expanded pension disclosure proposal is published later this year (see  FASB Throws Down Pension Reporting Gauntlet ).  However, Peter Proestakes, FASB’s pension project manager, said during the meeting that he may ask the board to hold one more meeting before issuing the standard, according to the Associated Press.

Regarding benefit payment projections, FASB board members decided upon a formula by which a company will have to say how much it expects to pay during each of the next five years, and also report total expected payments for the five years following that initial period.  The decision followed a debate over whether to let companies choose how they reported the cash flow impact.

Wednesday’s decision is part of a larger overall initiative that FASB is currently pursing to increase the amount and breadth of pension reporting done by companies.  Earlier this month, FASB backed off a plan to impose the reporting requirements for the current reporting year (see  FASB Retreats From Partial Pension Accounting Rule ).

At the Wednesday meeting, FASB board members also voted on the timetable for companies to start making the new disclosures. Much of the reporting will begin this year, but companies will have until 2004 to make some disclosures. For example, they won’t have to report estimated benefit payments until 2004.