GASB Unveils Proposal on Disclosure Requirements for Plans

December 15, 2006 ( - The Governmental Accounting Standards Board (GASB) has issued a proposal that could impose additional pension funding pressures on state and local governments.

The proposal by GASB comes just three months after the Financial Accounting Standards Board (FASB) issued a proposal on other post-employment benefits (OPEB) designed to ensure better accountability and a higher degree of transparency on pension funding by companies in the private sector (See FASB Publishes Final Standards for Pensions and OPEB).

Similarly, GASB, who is responsible for the establishment of standards of state and local governmental accounting and financial reporting, notes that the changes contained in the proposal are meant to “enhance accountability and improve the decision usefulness of financial information provided to citizens, elected representatives, investors, and other financial statement users about pensions in a number of areas.”  GASB had placed the project on its agenda in September (see  GASB May Require More Pension Disclosures ). 

Changes Proposed

The proposal suggests changes to financial reporting for defined benefit pension plans and for defined contribution plans (Statement No. 25) and accounting for pensions by state and local government employers (Statement No. 27) by requiring:

  • 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 employer governments to be presented in addition to funded status data currently presented as required supplementary information (RSI).
  • Disclosure by governments that use the aggregate actuarial cost method of the funded status and present a multiyear schedule of funding progress using the entry age actuarial cost method as a surrogate; these governments currently do not provide this information.
  • Additional note disclosures about actuarial methods and assumptions used in the valuations underlying information reported about the annual required contribution and funded status of the pension plan.
  • Disclosure by governments participating in cost-sharing pension plans of how the contractually required contribution rate is determined.
  • Presentation by governments in cost-sharing plans of the required schedule of funding progress if the plan does not issue a GAAP-compliant report that includes RSI or if the plan is not included in a publicly available financial report of another entity.

The requirements of the proposal would be effective for periods beginning after June 15, 2007.  The board has asked for written comments on the proposal by February 28, 2007.    

A copy of the proposal may be downloaded from the GASB s website at .