|  | | 2006 News and Press Releases | | |
HEADLINE NEWS:
FASB Issues A Tough New Statement On Pensions 'Financial Statements Will Be Complete'
Staff Writer – Accounting Today
Securities Mosaic. November 6, 2006
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EXCERPT: With the nation in an uproar over widespread pension fund problems, the Financial Accounting Standards Board has set a standard that will soon require companies to fully recognize on the balance sheet either an asset for a pension plan's overfunded status, or a liability for a plan's underfunded status. Standard 158, Employers' Accounting for Defined-Benefit Pension and Other Post-Retirement Plans, would eliminate companies' ability to only partially report the funded status of a post-retirement benefit plan - that is, the difference between the plan's assets and liabilities.
"This statement puts the obligation that companies have promised in the financial statements, so that they reflect all of the company's obligations and assets, so that an investor or anyone else can see the financial condition of the company and how well the company is able to fulfill those obligations," said FASB project manager Peter Proestakes. "Financial statements will be complete." Statement 158, which is amending Standards 87, 88 and 132R, also requires employers to measure a plan's assets and obligations that determine its funded status as of the end of the employer's fiscal year. Employers will also need to recognize changes in a plan's funded status in the year in which changes occur. The changes will be reported in the comprehensive income of a business entity or in the net assets of a not-for-profit. The nation's pension plans may be in the red to a total of $600 billion, according to the Government Accountability Office. The new standard will not resolve the country's retirement benefit woes, but it will help companies, investors, employees, retirees and others understand the financial condition of many public and private companies, as well as not-for-profit organizations. John Hepp, a senior manager in Grant Thornton's national professional standards group, said that though the change in accounting will affect balance sheets, it is not likely to affect the investment market, because the information has long been required in footnotes to financial statements. "The market should have known that this standard was coming for quite some time," Hepp said. "If it affects valuation models that analysts were using, then their models were probably wrong before." |
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