FASB Says "Enough" on Pension Disclosures

October 4, 2006 (PLANSPONSOR.com) - The Financial Accounting Standards Board (FASB) voted 6-1 yesterday against taking up a project on pension disclosure that could have led to requiring companies to disclose information about their expected pension contributions for the next five years.

The move leaves in place the FASB’s current requirement that companies must disclose how much they expect to contribute only over the next year, according to the Associated Press.  

The Pension Protection Act of 2006 will generally require companies to fully fund their pension plans within seven years, which will likely increase many companies’ pension contributions, and that certainly could have an impact on things like cash flow (see  The Pension Protection Act: This Changes Everything ).   However, according to the AP, the board decided against requiring more disclosure because it believes the Securities and Exchange Commission essentially already provides for it. Current SEC pension-disclosure guidelines require companies to address the impact of future cash payments on their cash flow (see  Shareholder Equity Expected to Drop 6% Due to New FASB Rules ).

Leslie Seidman, an FASB member who was one of those voting not to add a pension-disclosure project, said in an interview that she felt the SEC guidelines “very adequately captured” the situation created by the new law. The AP also noted that Seidman also said she hopes the SEC guidelines will prompt companies to “robustly” disclose any impact of the higher pension contributions they must make down the line because of the new pension-funding requirements.

Some experts predict the Financial Accounting Standards Board’s (FASB) final version of the first phase of its pension accounting rule changes will further complicate the jobs of plan sponsors and perhaps propel companies toward freezing their defined benefit plans (see  FASB Publishes Final Standards for Pensions and OPEB ).