The Financial Accounting Standards Board is proposing two new sets of standards that it says will improve the transparency of financial reporting for private sector defined benefit plans.
The initiative is part of a broader project to improve the effectiveness of financial disclosures by focusing on information that is most relevant to analysts and investors.
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Pension accounting is one of four areas of focus for improvement, according to a FASB document.
Under existing Generally Accepted Accounting Principles, stakeholders have noted pension cost disclosures make it costly for investors and other users to understand the information, "resulting in financial statements that are more opaque and less useful than they could be," according to FASB.
One proposed standard update would include a description of the benefits, the employees covered, and the type of benefit plan formula. It would also require a description of the reasons for significant gains and losses affecting benefit obligations or plan assets, among other things.
Another proposed standard update would require sponsors to report the service cost component of a plan in the same line item as other compensation costs for employees in the plan.
Under the proposed improvements, some existing disclosure requirements would be eliminated.
Among those are the accumulated pension obligation and the fair value of plan assets for plans with obligations in excess of plan assets.
FASB is asking stakeholders to provide comments of the proposed standard updates by April 25, 2016.
Here are links to review a copy of FASB's exposure draft or see a shorter summary of the updates.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
