The Accounting Standards Board’s proposed changes will have a significant impact on how employers account for their pension and other post-retirement obligations, says Buck Consultants.

Last week, the AcSB released an Exposure Draft that requires the net funded position of the plan, now generally disclosed only in the footnotes to the financial statements, to be recognized as an asset or liability in the employer’s balance sheet.

For some firms, that could lead to a considerable reduction in shareholders’ equity.

Companies will need to:

• Recognize the funded status of an entity’s post-retirement defined benefit plans on the balance sheet;
• Recognize of the changes in the funded status in comprehensive income in the year in which the changes occur;
• Recognize corresponding adjustments from accumulated other comprehensive income to components of benefit cost in net income to maintain the same reported net income as under current section 3461; and
• Measure plan assets and the accrued benefit obligation as of the balance sheet date, with limited exceptions

The recognition and related disclosure provisions will be effective for fiscal years ending on or after December 31, 2007 for publicly traded enterprises and not-for-profit organizations, and December 31, 2008 for non-publicly traded enterprises.

The measurement date provisions will be effective for fiscal years ending on or after December 31, 2008.

The AcSB has requested comments by the end of June and will issue a final document in the second half of the year.

To read the draft, click here.

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