FASB Proposes Additional Pension Disclosures

May 28, 2003 (PLANSPONSOR.com) - The Financial Accounting Standards Board (FASB) has made a preliminary decision requiring companies to offer more pension plan details - details that currently go unreported.

The proposal outlines four decisions of particular significance, includingan increase in information about corporate pension plans holdings and to study in more detail whether companies should have to tell more about how market forces could affect their pension liabilities, according to Dow Jones, citing FASB Chairman Robert Herz.

Further, companies would have to give their best estimate of how much they plan to contribute to pension trusts in the coming year, and detail their schedules for making benefit payments.

FASB board members tentatively decided “to propose a number of additional disclosures that could help users of financial statements better assess the composition” of various components of the pension plans, said Chairman Robert Herz.  “There is a consensus about the common objectives.”

Overall, the decisions will become part of a larger pension disclosure rule the FASB aims to adopt by the end of this year, according to the report.

Public Pressure

The nation’s accounting rulemaking body agreed to add pension accounting and disclosure to its formal review agenda after receiving a plethora of complaints about current pension accounting standards and suggestions on how to enhance corporate disclosure (SeeFASB Agrees To Look At Pension Accounting). 

Of particular concern were the “smoothing” provisions in FAS 87 (See   Smooth Move ). Smoothing allows companies to take certain assets and obligations off their balance sheets and amortize them as income or expenses over time.  Additionally, companies may be allowed to report their expected return on assets, instead of actual losses and gains.