FASB released the proposal on March 31 (See FASB Issues Proposed Accounting Changes for Pensions and OPEB ) and allowed a two-month comment period, which ended May 31.
The proposal would require employers to include pension plan assets and obligations on their balance sheets. It would also require companies to restate five or more years of prior financial statements, which some say will be a difficult and costly event for large companies with large pension plans.
Some of the comments to the FASB include:
- FedEx Letter : Corporate Vice President and Chief Accounting Officer, John Merino asked the Board to reconsider its requirement to “measure the net asset or net liability in the balance sheet on the basis of the underfunded or overfunded projected benefit obligation (PBO), because we do not believe the salary progression component of the PBO meets the definition of a liability,” nor do overfunded plans necessarily constitute an asset.
- Wells Fargo Letter : Senior Vice President and Controller, Richard Levy applauded the Board’s efforts to reform pension accounting standards, but warned that in regard to “large companies with numerous postretirement benefit plans, a reasonable amount of time after the measurement date needs to be provided to all for the collection of plan data and preparation of required general ledger entries and financial statement disclosures.” Levy contends that changing the measurement date to line up with year-end statements would be costly, because “companies would be competing for the limited resources of service providers in gathering this information in a relatively short period of time.”
- General Motors Letter : Controller Paul Schmidt wrote that the main challenge of the FASB’s proposal was conforming to the measurement date requirement, which would force “the actuarial process to be performed in a compressed time frame and will result in reduced time for management review and other corporate governance processes.” Schmidt suggested a one-year delay to allow companies enough time to brace for the change.
The FASB’s plan has triggered disapproval from many corners. Credit Suisse said in April that forcing companies to include pensions and other post-employment benefits to their balance sheets would cut 7%, or $255 billion, from total shareholders’ equity from the S&P 500 (See Analysis Estimates $255B FASB Rule Impact ). More grim estimates predict a 10% shareholder equity dip for Fortune 1000 companies (See New FASB Rules Could Cut Shareholder Equity by 10% ).
For all of the letters go here .
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