Proposed Changes to Pension and Other Post Retirement Benefits Disclosure Requirements

On January 26, 2016, the Financial Accounting Standards Board issued two new proposed Accounting Standards Updates in an effort to improve the presentation of Pensions and Other Post Retirement Benefits employers provide to their employees. These proposed amendments are aimed at adding more relevant disclosures to the readers/stakeholders of financial statements and eliminating disclosure requirements that readers/stakeholders told the Financial Accounting Standards Board they didn’t consider to be very important.

The proposed Accounting Standards Updated would be applied retrospectively to all periods presented with the exception of having qualitative disclosures for the plan assets  that are measured at net asset value would be only required to beginning with the period at the time of adoption. The effective date and if early adoption will be permitted will be determined once the Board receives feedback from the readers/stakeholders of financial statements regarding the proposed Accounting Standards Update.

Main Provisions in the Proposed Accounting Standards Update (From the Proposed Accounting Standards Update for Topic 715 & Subtopic 715-20 dated January 26, 2016)

Subtopic 715-20: Changes to the Disclosure Requirements for Defined Benefit Plans

Proposed Additions to Disclosure Requirements

1. A description of the nature of the benefits provided, the employee groups covered, and the type of benefit plan formula.
2. The weighted-average interest crediting rate for cash balance plans and other plans with a promised interest crediting rate.
3. Quantitative and qualitative disclosures from Topic 820, Fair Value Measurement, about assets measured at net asset value using a practical expedient.
4. A narrative description of the reasons for significant gains and losses affecting the benefit obligation or plan assets.
5. For private companies, not-for-profit organizations, and employee benefit plans, the effects of a one-percentage-point change in assumed health care cost trend rates.

Proposed Removal of Disclosure Requirements

1. The amount of the pension accumulated benefit obligation.
2. The aggregate pension accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets.
3. The amount and timing of plan assets expected to be returned to the organization.
4. The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.
5. Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts, and significant transactions between the employer or related parties and the plan.
6. The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.
7. For private companies, not-for-profit organizations, and employee benefit plans, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, private companies, not-for-profit organizations, and employee benefit plans would be required to disclose the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets.

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