Disclosure Framework—Disclosure Review:
Defined Benefit Plans

ACCOUNTING STANDARDS UPDATE NO. 2018-14, COMPENSATION—RETIREMENT PLANS—DEFINED BENEFIT PLANS—GENERAL (SUBTOPIC 715-20): DISCLOSURE FRAMEWORK—CHANGES TO THE DISCLOSURE REQUIREMENTS FOR DEFINED BENEFIT PLANS

 

Overview


On August 28, 2018, the FASB completed its project on amending the disclosure requirements under Subtopic 715-20 for employers that sponsor defined benefit pension or other postretirement plans as part of the disclosure framework project.  The amendments in this Update are the result of the Board’s consideration of the concepts in Conceptual Framework for Financial Reporting—Chapter 8, Notes to Financial Statements, as they relate to disclosures about defined benefit plans.

The guidance removes the following disclosure requirements from Subtopic 715-20:
  1. The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.
  2. The amount and timing of plan assets expected to be returned to the employer.
  3. The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.
  4. Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.
  5. For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets.
  6. For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.
The Update adds the following disclosure requirements:
  1. The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates
  2. An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.
The amendments in this Update also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:
  1. The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets
  2. The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.  

The Disclosure Framework Project


The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by generally accepted accounting principles (GAAP) that is most important to users of each entity’s financial statements.
 
On March 4, 2014, the Board issued a proposed FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, which the Board finalized on August 28, 2018. The Concepts Statement identifies a broad range of possible information for the Board’s consideration when deciding on the disclosure requirements for a particular topic. From that broad set, the Board will identify a narrower set of disclosures about that topic to be required on the basis of, among other considerations, an evaluation of whether the expected benefits of entities providing the information justify the expected costs. The Concepts Statement is used by the Board as part of the process for establishing disclosure requirements in accounting standards as well as for evaluating existing disclosure requirements, if and when the Board considers those requirements.
 
Before the Concepts Statement was finalized, the Board decided to test the concepts in the proposed Concepts Statement and improve the effectiveness of disclosure requirements in the following Topics:
  1. Fair Value Measurement (Section 820-10-50)
  2. Defined Benefit Plans (Section 715-20-50)
  3. Income Taxes (Section 740-10-50)
  4. Inventory (Section 330-10-50)
Additionally, disclosure requirements for interim reporting are being evaluated for modifications.
 

Effective Dates


The amendments in this Update are effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities.
 
An entity should apply the amendments in this Update on a retrospective basis to all periods presented.
 

Additional Information

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