In material expected to be the topic of board discussion at Thursday’s meeting that was prepared by FASB staff members and posted on the FASB Web site , the agency said the proposed stem to stern review of pension and post-retirement benefits is not expected to wrap up until the end of next year.
Staff members recommended that the board accomplish the pension reporting revamping in several phases, starting with deciding whether postretirement plans’ funding status should be accounted for in a company’s financial statement.
During the first stage, staff members recommended the board require that:
- companies recognize in their balance sheet a net postretirement benefit asset or a net postretirement benefit obligation for each sponsored defined benefit plan equal to the difference between plan assets measured at their fair value and the projected benefit liability (pensions) and accumulated postretirement benefits obligation (other postretirement benefits), measured as of the measurement date. FASB staff members asserted, “That would ensure an employer reports in the balance sheet the economic funded or unfunded status of its defined benefit postretirement plans.”
- Changes in the fair value of plan assets and the benefit obligation that are not currently required to be recognized in earnings (unrecognized gains and losses) would be reported as credits or charges through other comprehensive income (OCI).
- an intangible asset related to any unrecognized prior service costs be recognized consistent with the current requirements in Statement 87 when an additional minimum liability is recognized.
According the report, staff members recommend that FASB save the major rulemaking heavy lifting for the second phase of the project. That’s when the agency would “reconsider comprehensively most, if not all, aspects of the existing standards of accounting for postretirement benefits.”
The report said any FASB rule changes should be undertaken in concert with international accounting authorities who are developing new standards for companies around the world (See The Bottom Line: Let It All Hang Out ).