Published May 15, 2015

FASB Proposes Changes to Simplify Employee Benefit Plan Statements

The Financial Accounting Standards Board (FASB) recently released an exposure draft which included a Proposed Accounting Standards Update (PASU) related to employee benefit plans. The draft includes Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), and Health and Welfare Benefit Plans (Topic 965).

FASB issued the PASU to reduce complexity in employee benefit plan accounting consistent with FASB’s efforts to simplify and improve areas of generally accepted accounting principles by reducing the cost and complexity, and also by improving the usefulness of information for users of the financial statements.

Current standards require fully benefit-responsive investment contracts to be measured and presented on the face of plan financial statements at contract value with reconciliation to fair value, if there is a difference.   The American Institute of Certified Public Accountants (AICPA) asserts that contract value is the relevant measurement for these contracts as this is the amount participants normally receive if they were to initiate a withdrawal transaction. This PASU gives consideration to the usefulness of requiring the presentation of fair value on the face of the plan financial statements and would assign contract value as the only required measurement for fully benefit-responsive investment contracts. Certain disclosures specific to fully benefit-responsive investment contracts would still be required to help the users of the financial statements understand the nature and risks of these contracts.

FASB will consider feedback received during the comment period and determine the effective date thereafter.

If you would like more information about the proposed ASU or employee benefit plan accounting, please contact the expert listed below at PYA, (800) 270-9629.

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