The Financial Accounting Standards Board (FASB), the nation’s accounting rulemaking body, has tentatively ruled that public and private companies alike will have to tell investors and analysts whether they expect to change the amount they will contribute to a plan in a given year (See FASB Tightens Pension Reporting Noose ). At present, companies are only required to provide financial statements on retirement plans once a year.
Under the proposed changes, employers would also have to reveal:
- details about their investment returns
- information about where their pension costs are concentrated throughout the company
FASB’s board also decided that companies should report the amount they expect to pay in future benefits as a dollar amount, rather than a formula based on bonds with which benefit obligations are calculated. The new proposals are expected to become part of new pension disclosure rules that could go into effect as early as the end of this year.
“General Motors feels that the current pension disclosure requirements are adequate,” spokeswoman Toni Simonetti said according to a Reuters report. “The proposed new rule assumes you have one defined benefit plan. If you’re a multinational and you have several plans, it’s virtually impossible to comply with the (new) rule.”
The world’s largest automaker – which earlier this month announced falling bond rates had added $6 billion to $8 billion to its retirement liabilities – previously announced a massive debt offering to partially fund its pension funds and other retiree-benefit obligations. GM, whose pension plans were underfunded by $19.3 billion at the end of 2002, said it expects to make significant cash contributions to these funds by late 2003 (See GM Driving Debt Proceeds To Pension Liabilities ).
A contribution at the end of the year would come after GM contributed $5.8 billion to its US pension and retiree benefit plans during 2002 and another $1.2 billion in GM Class H common stock in 2003. Overall, the company announced plans to contribute roughly $15 billion to its pension and retiree benefit plans by 2007.
The move by FASB comes after the governing body agreed to add pension accounting and disclosure to its formal review agenda after receiving a plethora of complaints about current pension accounting standards and suggestions on how to enhance corporate disclosure (See FASB Agrees To Look At Pension Accounting ). Last month, FASB announced a preliminary decision to move in this direction (see FASB Proposes Additional Pension Disclosures ).