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By John F. Burke, CPA,
The CPA Journal

n February 1998, the FASB issued SFAS No. 132, Employers' Disclosures About Pensions and Other Postretirement Benefits. The statement is an amendment of FASB statements No. 87, 88, and 106. It was issued as a result of the board's project on disclosure effectiveness that was covered in the Journal's November 1997 article on the exposure draft.

The new statement supersedes the disclosure requirements of the statements it amends. It does not address measurement or recognition issues. While it adds, drops, and changes certain disclosure requirements, the main purpose is to standardize disclosures for pensions and other postretirement benefits. In effect, it puts all such disclosure requirements in one footnote. The major components of this one note will be parallel disclosures for both pension benefits and other benefits of changes in benefit obligations and plan assets, the funded status and amounts recognized and not recognized in the statement of financial position, certain weighted-average assumptions as of the end of the year, and the components of net periodic benefit costs.

Changes from Previous Requirements

The new statement has the following major changes from previous disclosure requirements. It adds requirements to disclose--

    * changes in the benefit obligation,

    * contributions by employers and participants, and

    * amounts recognized as intangible assets, other comprehensive income, and accumulated other comprehensive income.

    It eliminates requirements to--

    * provide general descriptive information about the employer's health plan. Responding to those who objected to this elimination in the exposure draft, the board now encourages an employer to provide a description of the plan if such description would provide meaningful information, such as when the employer sponsors only a single plan.

    * disaggregate disclosure for plans with accumulated pension obligations that exceed plan assets.

    * disaggregate contributions to multiemployer plans into pension and other postretirement benefit costs.

    * disclose alternative measures of the benefit obligation and the portion of other postretirement obligations attributable to retirees, etc.

The statement changes the requirements regarding health-care trend rates to require the disclosure of the effects of a one-percentage-point increase and a one-percentage-point decrease in such rates.

It also has optional reduced reporting requirements for nonpublic entities. Such entities have the same reporting requirements as public entities for benefit obligations, plan assets, recognized assets or liabilities, cash flows, benefit costs, actuarial assumptions, and related party transactions.

Changes from Exposure Draft

The following are the major changes from the exposure draft. The exposure draft had--

    * eliminated the requirement to disclose the components of net periodic benefit cost. This has now been reinstated.

    * changed the requirements for disclosure concerning health-care cost trend rates to require the disclosure of the weighted-average assumed health-care cost trend rate. The final statement leaves such disclosures as is.

    * limited the optional disclosure requirements for nonpublic companies to those whose total unrecognized pension and other postretirement amounts did not exceed five percent of equity. This five percent test has been dropped.

Effective Date

The statement is effective for fiscal years beginning after December 15, 1997, with earlier application encouraged. Restatement of disclosures is required for all periods presented for comparative purposes unless the information is not readily available. If that is the case, disclosure is required of the available information and a description of the information not available.

Where Do We Go from Here?

The project on disclosure effectiveness started with a Jenkins Committee recommendation that "standard setters should search for and eliminate less relevant disclosures." Some hoped this would lead to less disclosures. However, the board chose to concentrate on disclosure effectiveness rather than standards overload. This new standard is a good example of that approach. Combining the disclosure requirements of three standards into one footnote is an effective technique but it certainly didn't cut down on the amount of information disclosed.

At this point, it appears the project may have reached the end of the line. In published remarks, chairman Jenkins has indicated that disclosure reform plans are up in the air and indicated they would be put on the back burner. That way, no one will notice when they turn off the gas. *

Douglas R. Carmichael, PhD, CPA
Baruch College

John F. Burke, CPA
The CPA Journal

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