Financial Accounting Standards Board, Norwalk, Conn., on Friday is expected to issue a standard in its overhaul of pension accounting that will require corporations to fully recognize the obligations of defined benefit plans, retiree health care and other postretirement plans in their financial statements, said Gerard Carney, communications director.
The new standard, among its expected final provisions, will require liabilities of underfunded plans or assets of overfunded plans to be shown on the corporate balance sheet.
The final statement is expected to be similar to the exposure draft. But one expected change from the exposure draft, based on reaction to constituency comments and roundtables, includes eliminating any requirement for a retrospective application of the new standard to financial statements, rather than the five years originally proposed.
Under current accounting standards, reported pension and other postretirement assets and liabilities often differed from the plans' funded status because of delayed recognition of changes in assets and liabilities, while disclosure of the completed funded status was confined to financial statement notes, according to a FASB statement.
Anticipating the new standard, Rebecca McEnally, director-capital markets policy group, CFA Institute, said: "We strongly support FASB's work. We think it will be an important improvement to the clarity, completeness and timeliness of pension reporting. FASB moved the current pension accounting from a footnote into the financial statements," recognizing changes in the funding status of plan as they occur.
The new standard, which amends FASB statements 87, 88, 106 and 132R, will end phase one of FASB's two-part effort to overhaul pension and other postretirement benefits accounting. Phase two will look at the way pension obligations are measured and the way their costs flow into the corporate income statement, Ms. McEnally said. FASB hasn't set a completion date for the second phase.