FASB Proposes Greater Disclosure of Plan Asset Risk

According to a Board meeting handout, the proposed amendments would:

• Provide a principle for disclosing categories of plan assets and specific examples of categories that an employer would provide in complying with the principle,
• Require further disclosure of categories or subcategories for concentrations of risk in plan assets, and
• Require certain disclosures about fair value measurements of plan assets similar to FASB Statement No. 157, Fair Value Measurements.

In the handout, FASB explains that Statement 132 requires disclosure of the percentage of fair value of total plan assets “for each major category of plan assets, which shall include, but is not limited to, equity securities, debt securities, real estate, and all other assets for each major category of plan assets.” FASB said users have expressed concerns that these asset categories are not specific enough to determine the risks associated with the types of assets held in a plan.

FASB proposed that Statement 132 be amended to require disclosure of asset categories based on the risks and expected long-term rate of return associated with each asset category. The asset categories are to include, but not be limited to, equity securities; debt securities issued by national, state, and local governments; corporate debt securities; mortgage-backed securities; derivatives; and real estate, and all other assets.

The proposal also suggested plans disclose significant investments in one company, industry, country, or type of security.

Finally, FASB suggested amending Statement 132 to require employers to disclose input assumptions used in calculating the fair value of plan assets.

The meeting handout is here .