On Friday, July 31st,
the Financial Accounting Standards Board (FASB) provided guidance designed to
help in simplifying the accounting of employee benefit plans in a three-part
document included in Accounting Standard
Update (ASU) No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic
960), Defined Contribution Pension Plan (Topic 962, Health and Welfare Benefit
Plans (Topic 965).
Part I of the update assigns
contract value as the only required measure for fully benefit-responsive investment
contracts. This part will reduce the
complexity of reporting for fully benefit-responsive investment contracts while
still requiring disclosures helping users understand these investment contract
types.
Part II, of the update
eliminates requirements for participant-directed investments and
nonparticipant-directed investments to disclose:
·
The net appreciation or depreciation for
investments by general type.
·
Individual investments representing five percent
or more of net assets available for benefits.
Stakeholders informed FASB
that disclosing similar investment information in multiple ways is costly for
preparers and makes the financial statements more difficult to use. It is important to note that FASB will still
require net appreciation or depreciation in investments to be presented in the
aggregate, but it will no longer require amounts to be disaggregated and
disclosed by general type.
Finally, Part III relates to
an area of several potential simplifications submitted by stakeholders. It provides
a practical expedient allowing the employer to measure and define benefit plan assets
on a month-end date nearest to the employer’s fiscal year-end, when the fiscal
period does not coincide with a month-end.
These amendments in each part
of the ASU will be effective for fiscal years beginning after December 15,
2015. Earlier application is permitted, and the amendments in Parts I and II
should be applied retrospectively for all financial statements presented. Part III should be applied prospectively.
