January 28, 2016
FASB Proposes Updates to Accounting Standards for Defined Benefit Pension and Other Postretirement Benefit Plans
On January 26, 2016, The Financial Accounting Standards Board (FASB) issued two proposed updates to its accounting standards for defined benefit pension and other postretirement benefit plans:
- Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans is part of FASB’s larger disclosure framework project that is intended to improve the effectiveness of financial statement disclosures by focusing on the most relevant information. This update would modify the disclosure requirements for defined benefit pension and other postretirement benefit plans by requiring some new information to be reported (such as descriptions of plan benefits and the reasons for significant gains and losses affecting the benefit obligations or plan assets) and removing the requirement to report some items that have historically been disclosed.
- Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost would modify how the components of net benefit cost are presented. The update would provide explicit guidance on how to present the service-cost component, which would now be disaggregated and reported as other compensation costs, and the other components of net benefit cost, which would now be presented separately from service cost and not part of income from operations. FASB believes this “would improve the consistency, transparency, and usefulness of financial information to users” and notes that “users have told the FASB that service cost is analyzed differently and has different predictive value from the other components of net benefit cost.”
FASB has asked for comments on the proposed updates, which can be accessed from FASB’s website,
by April 25, 2016.
Employers should rely on their accountants for authoritative advice on all accounting requirements. If you have questions about the implications of the proposed accounting changes for your plan, please contact your Sibson consultant or Vice President Michael Marks.