CPA Resources
CPA Resources

FASB issues proposed accounting standards for multi-employer pension plans

NORWALK, Conn., Sept. 2, 2010 — The Financial Accounting Standards Board has issued an exposure draft of a proposed accounting standards update intended to increase transparency in financial reporting about entities that participate in multi-employer pension and other postretirement benefit plans.

The proposed update sets forth proposed disclosures that the FASB believes would help users of financial statements better assess the potential risks faced by employers participating in multiemployer plans.

A recent study of more than 100 multi-employer plans, including the largest plans in the country (as measured by assets), indicated that in 2008 those plans were collectively underfunded by over $160 billion (approximately 44 percent of their collective plan liabilities). Current U.S. GAAP requires employers to disclose their total contribution to multiemployer plans, but there is no requirement to describe the funding status of these plans. Under the proposed guidance, employers would have to provide more information, including a description of the plans in which the employer is involved, the employer’s contractual commitments to the plans, and the expected impact of participating in the plans on the employer’s future cash flows (including the potential impact of plan withdrawal obligations).

“Investors and other financial statement users have expressed concern that current financial statements do not provide enough information about the commitments and potential risk related to multiemployer pension arrangements,” said FASB member Leslie Seidman. “We encourage our constituents to review and provide comment on the Board’s suggestions for expanding disclosure in this area, one that has gained greater urgency as a result of the recent financial crisis and underfunding of many such plans.”

If approved, the proposed Update would require a public company to provide the enhanced disclosures for fiscal years ending after Dec. 15, 2010, and in subsequent fiscal years.

A nonpublic company would be required to provide the enhanced disclosures for fiscal years beginning on or after Dec. 15, 2010, and in subsequent fiscal years (one year later than a public company).

The comment period for the proposed update extends through Nov. 1, 2010. The exposure draft is available at www.fasb.org.

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