The Financial Accounting Standards Board (FASB) recently released changes to the defined benefit plan disclosure framework. Accounting Standards Update 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans, Topic 715-20 (ASU 2018-14) removes several disclosure requirements, and adds and clarifies others in an effort to provide more useful information for benefit plan financial statements.
Public entities will adopt the changes for fiscal years beginning after Dec. 15, 2020 (generally the 2021 calendar year). All others will adopt for fiscal years ending after Dec. 15, 2021 (generally the 2022 calendar year).
Disclosures that are Going Away
When examining changes to make to defined benefit plans, the FASB sought to remove disclosures that are no longer considered cost beneficial. The following disclosures will be removed from Topic 715-20:
- The amounts in accumulated other comprehensive income (AOCI) expected to be recognized as components of net periodic benefit cost over the next fiscal year.
- The amount and timing of plan assets expected to be returned to the employer.
- The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.
- Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.
- Nonpublic entities can eliminate disclosures related to the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. They will continue to separately disclose the transfers into and out of Level 3 of the fair hierarchy and purchases of Level 3 plan assets.
- Public entities can eliminate the effects of a one-percentage-point change in assumed health care cost trend rates on the:
- Aggregate of the service and interest cost components of net periodic benefit costs; and
- Benefit obligation for post-retirement health care benefits.
Disclosures Being Clarified
ASU 2018-14 clarifies disclosure requirements in Topic 715-20 related to projected benefit obligation (PBO) and accumulated benefit obligation (ABO). Entities will disclose the PBO and fair value of plan assets for plans with PBOs in excess of plan assets, and also the ABO and fair value of plan assets for plans with ABOs in excess of plan assets.
Entities will be required to disclose the weighted average interest crediting rates for cash balance plans and other plans with promised interest crediting rates. They will also need to include reasons for significant gains or losses or any other significant changes in the benefit obligation for the reporting period.
Entities will adopt ASU 2018-14 on a retrospective basis to all reporting periods presented in the financial statement in the year of adoption. Early adoption is permitted.
For More Information
For comments, questions or concerns about the changes to defined benefit disclosures, please contact Hal Hunt of MHM's Professional Standards Group. Hal can be reached at 816.945.5610 or firstname.lastname@example.org.
Published on September 04, 2018