NORWALK, Conn. — The Financial Accounting Standards Board stuck to its plan to use projected benefit obligations to measure pension liabilities and the funded status of pension plans, despite objections in many of the more than 240 comment letters FASB received on its proposed pension accounting rule.
The decision, announced by the board July 12, will lead corporations to report bigger liabilities because the PBO includes projected salary increases. The alternative, accumulated benefit obligations, doesn't include projections.
The FASB expects to issue the rule in September for phase one of its pension accounting overhaul project, which will require companies to show on the corporate balance sheet the funded status of pension plans.
The use of PBO will tend to magnify the underfunding or decrease the excess funding of pension plans.
"It did not appear that board members were swayed by any of the negative feedback they received on this issue," according to a report following the FASB action by Michael A. Moran, vice president-portfolio strategist, and Abby Joseph Cohen, managing director and portfolio strategist, at Goldman Sachs & Co., New York. "All along the FASB has been saying they would use the PBO in phase one and then, in phase two, they would focus on determining whether the right definition is the PBO, the ABO, or some other definition."
Many comment letters favored use of ABO.
The FASB hasn't given a timetable for completing phase two of the project.