Employers’ Disclosures about Pensions and Other Postretirement Benefits—an amendment of FASB Statements No. 87, 88, and 106 (Issued 12/03)
This Statement revises employers’ disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, Employers’ Accounting for Pensions, No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. This Statement retains the disclosure requirements contained in FASB Statement No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits, which it replaces. It requires additional disclosures to those in the original Statement 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The required information should be provided separately for pension plans and for other postretirement benefit plans.
Reasons for Issuing This Statement
This Statement was developed in response to concerns expressed by users of financial statements about their need for more information about pension plan assets, obligations, benefit payments, contributions, and net benefit cost. Users of financial statements cited the significance of pensions for many entities and the need for more information about economic resources and obligations related to pension plans as reasons for requesting this additional information. In light of certain similarities between defined benefit pension arrangements and arrangements for other postretirement benefits, this Statement requires similar disclosures about postretirement benefits other than pensions.
Differences between This Statement and Statement 132
This Statement retains the disclosures required by Statement 132, which standardized the disclosure requirements for pensions and other postretirement benefits to the extent practicable and required additional information on changes in the benefit obligations and fair values of plan assets. Additional disclosures have been added in response to concerns expressed by users of financial statements; those disclosures include information describing the types of plan assets, investment strategy, measurement date(s), plan obligations, cash flows, and components of net periodic benefit cost recognized during interim periods. This Statement retains reduced disclosure requirements for nonpublic entities from Statement 132, and it includes reduced disclosures for certain of the new requirements.
How the Changes in This Statement Improve Financial Reporting and How the Conclusions in This Statement Relate to the Conceptual Framework
FASB Concepts Statement No. 1, Objectives of Financial Reporting by Business Enterprises, states that financial reporting should provide information about economic resources of an enterprise, claims to those resources, and the effects of transactions, events, and circumstances that change its resources and claims to those resources. This Statement, including the manner of presentation illustrated in Appendix C, results in more complete information about pension and other postretirement benefit plan assets, obligations, cash flows, and net cost and, thereby, assists users of financial statements in assessing the market risk of plan assets, the amount and timing of cash flows, and reported earnings.
FASB Concepts Statement No. 2, Qualitative Characteristics of Accounting Information, identifies relevance and reliability as the characteristics of financial information that make it useful. This Statement enhances disclosures of relevant accounting information by providing more information about the plan assets available to finance benefit payments, the obligations to pay benefits, and an entity’s obligation to fund the plan, thus improving the information’s predictive value. Reliability of accounting information will be improved by providing more complete and precise information about postretirement benefit resources and obligations.
Benefits and Costs
Entities that prepare financial statements in conformity with generally accepted accounting principles already compile and aggregate information about pension plans and other postretirement benefit plans, including information about plan assets, benefit obligations, and net cost. Information about equity securities, debt securities, real estate, and other assets is likely to be available from asset management records. Reporting of information about pension plans and other postretirement benefit plans required by this Statement may require some additional effort and cost, including amounts that may be paid to entities’ auditors and actuaries; however, that information is already essential in complying with Statements 87, 106, and 132 and therefore should be available to, and understood by, preparers of financial statements. Additional costs to compile, analyze, and audit the additional disclosures required by this Statement are believed to be modest in relation to the benefits to be derived by users of financial statements.
Effective Date and Transition
The provisions of Statement 132 remain in effect until the provisions of this Statement are adopted. Except as noted below, this Statement is effective for financial statements with fiscal years ending after December 15, 2003. The interim-period disclosures required by this Statement are effective for interim periods beginning after December 15, 2003.
Disclosure of information about foreign plans required by paragraphs 5(d), 5(e), 5(g), and 5(k) of this Statement is effective for fiscal years ending after June 15, 2004.
Disclosure of estimated future benefit payments required by paragraph 5(f) of this Statement is effective for fiscal years ending after June 15, 2004.
Disclosure of information for nonpublic entities required by paragraphs 8(c)–(f) and 8(j) of this Statement is effective for fiscal years ending after June 15, 2004.
Until this Statement is fully adopted, financial statements that exclude foreign plans from (a) the actual allocation of assets, (b) the description of investment strategies, (c) the basis used to determine the expected long-term rate-of-return-on-assets assumption, or (d) the amount of accumulated benefit obligation should include, separately for domestic plans, the total fair value of plan assets as of the measurement date(s) used for the latest statement of financial position presented and the overall expected long-term rate of return on assets for the latest period for which a statement of income is presented.
The disclosures for earlier annual periods presented for comparative purposes should be restated for (a) the percentages of each major category of plan assets held, (b) the accumulated benefit obligation, and (c) the assumptions used in the accounting for the plans. The disclosures for earlier interim periods presented for comparative purposes should be restated for the components of net benefit cost. However, if obtaining this information relating to earlier periods is not practicable, the notes to the financial statements should include all available information and identify the information not available.
Early application of the disclosure provisions of this Statement is encouraged.