FASB Approves Stricter Pension Asset Valuation Rules

October 31, 2008 (PLANSPONSOR.com) - The Financial Accounting Standards Board (FASB) has voted to require that employers provide extensive information about the fair value of assets in pension plans, in a move that runs counter to a staff recommendation.

According to a news report posted on Markets Media Online, FASB decided this week that the final staff position will be effective for fiscal years ending after December 15, 2009, a year later than originally anticipated.At initial adoption, asset values would not be required for earlier periods that are presented for comparative purposes in an employer’s financial documents.

Markets Media Online said in FASB’s redeliberation of proposed FSP FAS 132(R)-a, Employers’ Disclosures about Postretirement Benefit Plan Assets, the agency decided to amend FASB Statement No. 132 (see  FASB Proposes Greater Disclosure of Plan Asset Risk ) to require that an employer disclose not only the level within the fair value hierarchy in which fair value measurements of plan assets fall, but also provide information about the valuation techniques used to measure the fair value plan assets

Not only that, the report said, but employers will be required for the first time to provide a reconciliation of beginning and ending balances for fair value measurements of plan assets using “significant unobservable inputs.”

“Many companies were concerned about the high cost [of performing the reconciliation], particularly for international plans,” said Phillip Hood, assistant project manager, in the news report. “At this point, we’re saying that the beginning balance and the ending balance are more useful than the reconciliation.”

Chairman Robert Herz agreed, saying that, “we’re already significantly increasing the level of disclosures,” and questioned the “costs and benefits” of including the fair value reconciliation in the staff position, which also requires increased disclosure of management investment decisions and strategy.