FAS 158 New Pension Plan Reporting

By: Dennis Gardiner, Partneremail

Recently, the Federal Accounting Standards Board (FASB) instituted Statement No. 158 which is an amendment to several other FASB statements concerning the reporting of pension funds for a defined benefit post-retirement plan ('Plan').

No. 158 requires that any employer who sponsors one or more Plans:

  • Recognize the over-funded or under-funded status of a Plan [the difference between fair market value and benefit obligation] as an asset or liability in the company's year-end financial statements.
  • Recognize as a part of other comprehensive income, net of tax, certain gains and losses associated with the Plan.  These are items that would not be considered components of net periodic benefit costs.
  • Footnote any occurrences that may change the status of net periodic benefit costs for the following fiscal year due to delayed recognition of certain gains or losses.
  • Measure the funded status of a Plan from the date of the company's year-end financial statements.
The application of FAS No. 158 does not have an impact on the company's income statement.  However, the impact on the company's balance sheet may be significant depending on the magnitude of the over-funded or under-funded status of the plan. The Board decided to implement No. 158 due to concerns that previous requirements did not allow employers to clearly and completely communicate the funded status of a Plan.  One of those concerns was that certain events affecting the Plan's funded status could also have a financial effect on the company and should therefore be recorded, along with footnotes about the specific event, in the company's year-end financial statements.  Another concern was that while employers were allowed to recognize the value of assets or liabilities arising from the plan, the over-funded or under-funded status of a Plan was usually different from those values. This new standard now helps to clarify the status of Plans by requiring employers to recognize critical information on the financial statements instead of only recording it in the footnotes, more clearly communicating your financial position to your members. For more information on how these changes could affect your business, please contact us.  We're here to help!