The Financial Accounting Standards Board (FASB) is initiating a new project to reconsider guidance given in two statements concerning pensions and post retirement benefits. The goal is to improve the reporting of these plans and increasing the use and transparency of this information on financial statements. Reuters reports that the FASB’s review should be completed by the end of 2006.
“We have heard many different views from our constituents about how the accounting model should be reconsidered to improved transparency and usefulness." Robert Herz, Chairman of the FASB, said a prepared statement. "The breadth and complexity of the issues involved and the views on how to address them are deeply held. While the accounting and reporting issues do not appear to lend themselves to a simple fix, the Board believes that immediate improvements are necessary and will look for areas that can be improved quickly.”
The combined advantage of PPC and Checkpoint® for integrated tax compliance and planning
RIA's Checkpoint has now integrated the industry's leading tax compliance and planning resources from PPC PPC’s Tax Deskbooks™, renowned for the unique Key Issues Approach to step-by-step return preparation, and PPC’s Business Tax Planning Library™, which provides tax return roadmaps and practice aids to quickly identify potential tax planning opportunities from completed tax returns.
Try PPC's Tax Deskbooks™ on Checkpoint and PPC's Business Tax Planning Library™ on Checkpoint FREE for 30 days.
The project will be completed in two phases. The first phase seeks to change the fact that important information concerning the status of a company’s plan is reported in footnotes but not in basic financial statements. The transparency of this information will be improved by recognizing the value of plan assets and benefit obligations on a company’s balance sheet.
The second phase would address issues such as showing income affecting the cost of providing postretirement benefits, measuring obligations espcially those with lump-sum settlement options, and defining guidance needs especially for measurement assumptions.
Smoothing is one criticism of current corporate pension accounting. Robert Willens, a Lehman Brothers tax and accounting analyst speaking to Reuters said, “Smoothing is an approach that seeks to reach a long-term average of pension plan results and that would almost certainly be scrapped in favor of reporting the actual performance of the fund in the financial statements.”
The FASB seeks to ensure that the rules for pensions and other benefit plans provide credible, comparable, conceptually sound, useable information to the public. Other organizations reviewing pension systems such as the Department of Labor and the Pension Benefit Guaranty Corporation will also have a voice in affecting these goals. They will also work with the International Accounting Standards Board (IASB) and other standards setters seeking the international convergence of accounting standards.
Ed Ketz is an associate professor of accounting at Pennsylvania State University and the author of a new book, “Accounting Ethics.” Ketz said in USAToday, “It’s long overdue. They’re moving in the right direction in terms of studying the issue. We’re not 100% sure what they will do as a final rule.”