Proposed disclosure changes for pensions.

• Author: Gauthier, Stephen J.
• Position: The Accounting Angle

The Governmental Accounting Standards Board (GASB) recently issued an exposure draft (ED) on Pension Disclosures. The proposed new guidance would modify the notes and required supplementary information (RSI) currently mandated for pensions to bring them into line with the notes and RSI recently mandated for other postemployment benefits (OPEB).

BACKGROUND

The GASB recently issued comprehensive guidance on accounting and financial reporting for OPEB for both plans and employers. That guidance was based on the premise that OPEB and pensions are essentially similar in that both constitute a form of compensation for services rendered while the beneficiary was an active employee.

Because the GASB concluded that OPEB are essentially similar to pensions, the guidance provided for OPEB in GASB Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, was closely modeled on the earlier guidance offered for pensions in GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers. All the same, the GASB did made a few changes in the process of incorporating its existing pension guidance into the new OPEB standards. The ED proposes to amend the pension standards to incorporate these same changes so that the disclosure and RSI requirements for pensions will conform to those for OPEB.

PENSION PLANS

RSI change. GASB specifically allows the use of the aggregate actuarial cost method. Because that method does not involve the calculation of the unfunded actuarial accrued liability (UAAL), it is impossible to prepare a schedule of funding progress using actuarial data provided by this method. Therefore, the ED proposes instead that pension plans that use the aggregate method be required to prepare a schedule of funding progress using actuarial data calculated using the entry-age actuarial cost method.

Additional or modified note disclosure. The ED proposes the following additional or modified note disclosures for pension plans:

* Describe in the summary of significant policies how fair value is determined (e.g., methods, significant assumptions) if fair value is based on something other than quoted market price

* Disclose any legal or...