FASB Proposes Updates to Accounting Standards for DB, DC Plans

The Financial Accounting Standards Board (FASB) has proposed updates to accounting standards for defined benefit and defined contribution plans. The FASB Emerging Issues Task Force put together the proposals, which are contained in an FASB Exposure Draft issued on April 23.

The topics the exposure draft covers include plan accounting for DB pensions plans (Topic 960) and DC pension plans (Topic 962). The proposals are intended to reduce complexity in employee benefit plan accounting. They are consistent with the FASB’s Simplification Initiative, through which the FASB seeks to identify, evaluate and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced.

Under Topics 960 and 962, classes of assets are grouped and disclosed on the basis of general type. Examples of classes of assets grouped and disclosed by general type include:

• registered investment companies;
• government securities;
• common collective trusts;
• pooled separate accounts;
• short-term securities;
• corporate bonds;
• common stocks;
• mortgages; and 
• real estate. 

The proposed amendments would require that participant- and nonparticipant-directed investments of employee benefit plans be grouped only by general type. The task force says this would eliminate the need to disaggregate the investments in multiple ways.

The task force proposes designating contract value, relevant to Topic 962, as the only required measure for fully benefit-responsive investments contracts. This, the task force argues, maintains the relevant information while reducing the cost and complexity of reporting for fully benefit-responsive investment contracts.

The task force reached a consensus that the amendments in the proposed update should be applied retrospectively to all periods presented beginning in an entity’s fiscal year of adoption. The task force believes that it is appropriate for the disclosures to be consistent in all periods presented in a reporting entity’s financial statements because it would allow for greater comparability.

The effective date will be determined after the task force considers comments it receives on the proposed update.

Comments Invited

The FASB will accept comments on the proposals included in the exposure draft. Comments are due by May 18 and may be submitted in the following ways:

• through the Using the electronic feedback form available on the FASB website at Exposure Documents Open for Comment; 
• through an email to [email protected], File Reference No. EITF-15C – I, File Reference No. EITF-15C – II, and File Reference No. EITF-15C – III; and 
• by sending written comments to: Technical Director, File Reference No. EITF-15C – I, File Reference No. EITF-15C – II, and File Reference No. EITF-15C – III, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.