November 7, 2016
At its meeting on November 2, the Financial Accounting Standards Board (FASB) affirmed some accounting changes regarding the presentation of net periodic benefit cost that were proposed in January 2016. FASB is currently drafting the final Accounting Standards Update, which is expected to be released in January 2017 and will require sponsors of defined benefit and other postretirement benefit (OPEB) plans to do the following:
FASB also affirmed that, going forward, service cost would be the only component of net periodic benefit cost eligible for capitalization (as part of an asset such as inventory or property, plant, and equipment).
When it first announced these proposed changes in January, FASB stated that it believed these changes “would improve the consistency, transparency, and usefulness of financial information to users” and noted 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.”
The changes will be effective for reporting periods beginning after December 15, 2017 for public entities and for reporting periods beginning after December 15, 2018 for all other entities. The disaggregation of service cost will be applied retrospectively. Early adoption will be permitted.
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.
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