GASB May Require More Pension Disclosures

September 1, 2006 ( - Accounting standards writers for government agency accountants are following their private-sector counterparts as they move toward requiring additional pension plan disclosures in governmental financial statements.

The Governmental Accounting Standards Board (GASB) added a project to its current technical agenda that likely will require state and local governments to provide enhanced disclosures and supplementary information about their pension plans to users of governmental financial statements, the agency announced in a news release.

The project, which is expected to be completed “expeditiously,” intends to bring current pension disclosure requirements for governments in line with those recently required for other post-employment benefits, or OPEB (See GASB Issues Guide for OPEB Statements  ).

Additionally, the board is conducting research to determine the effectiveness of existing governmental accounting standards in this area. GASB members will decide, based on feedback from its research, whether further changes to current governmental accounting standards for pensions are necessary.

“Both of these projects reflect the GASB’s commitment to help ensure that users of governmental financial statements have access to the highest quality information available to make their decisions,” said Robert Attmore, GASB chairman, in the news release. “While accounting standards do not and cannot require funding of such pension plans, the information they provide enhances constituent knowledge about how well these obligations are being met. Our short-term project intends to address certain shortfalls in pension disclosures that were first identified during the development of the OPEB standards, while our pension research project will better enable us to properly determine if even greater steps need to be taken.”

OPEB disclosure requirements previously adopted by the board that potentially would be required for pensions include:

  • Disclosure of the current funded status of the plan as of the most recent actuarial valuation date in the notes to the financial statements of pension plans and certain employers.
  • Note disclosure of funded status and a multi-year schedule of funding progress using the entry age actuarial cost method as a surrogate when the aggregate actuarial cost method has been used to determine annual required contributions and annual pension cost.
  • Additional note disclosures about actuarial methods and assumptions used in valuations on which reported information about the annual required contribution (ARC) and funded status of the plan is based.
  • Disclosure by cost-sharing employees of how the contractually required contribution rate is determined.
  • Presentation of the required schedules for a cost-sharing plan in which an employer participates in the employer’s report if the plan does not issue a GAAP-compliant report that includes required supplementary information (RSI) or the plan is not included in the financial report of another entity.

In March 2006, the Financial Accounting Standards Board (FASB) issued the draft of proposed rules requiring employers to recognize the overfunded or underfunded positions of defined benefit pension plans and other post-employment benefits (OPEB) in their balance sheets ( FASB Issues Proposed Accounting Changes for Pensions and OPEB ).