FASB today approved a proposal to require a more detailed breakout of corporate pension fund asset allocations, including derivatives, to obtain a better assessment of concentrations of risk. The proposal, which would amend Financial Accounting Statement 132 (revised), is expected to be issued by March 7, said Christine Klimek, communications manager. Following a 45-day public comment period, the Financial Accounting Standards Board would decide whether to adopt the amendment. The proposal, which would also apply to other post-employment benefit funds, would take effect for financial statements after Dec. 15, 2008.
Disclosure of asset categories shall be based on the risks and expected long-term rate of return associated with each asset category, the proposal said. It calls for specifying by percentage the allocations in debt securities by federal, state and local governments, as well as corporate debt and mortgage-backed securities and derivatives. Additional categories or subcategories shall be disclosed for concentrations of risk, the proposal states.
Increasing use of alternative investments raised financial statement users concerns that current disclosures of plan assets are not detailed enough to determine what types of assets are held in post-retirement benefit plans, according to a FASB staff memo. Disclosure of more specific asset categories would enable users to better assess the timing, uncertainty and amount of future cash flows related to an increase or decrease in the value of plan assets.