FASB Completes Pension Reporting Standard

The Financial Accounting Standards Board has released a final version of a major new retirement plan accounting rule.

FASB, Norwalk, Conn., says the standard, “Statement of Financial Accounting Standards Number 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” will require employers to include obligations associated with single-employer defined benefit pensions, retiree health plans and other postretirement plans in their financial statements.

The new standards will replace existing standards that let employers put plan funding information in financial statement notes, FASB officials say in a discussion of the new standards.

The new standards also will eliminate “smoothing,” the practice of spreading gains and losses that occur during a specific year over several years.

“Employers reported an asset or liability that almost always differed from the plan’s funded status because previous accounting standards allowed employers to delay recognition of certain changes in plan assets and obligations that affected the costs of providing such benefits,” FASB officials say.

But the new standard “does not change the basic approach to measuring plan assets, benefit obligations, or annual net period benefit cost,” FASB officials note.

Because employers already have been disclosing retirement plan funding information in financial statement notes, “no new information or new computations other than those related to income tax effects are required,” officials say.

Under the new standards, a retirement plan sponsor must:

- Recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status.

- Recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur.