The guidance requiring current recognition and measurement for an employer’s participation in a plan – specifically, that an employer must recognize its required contribution to the plan as a pension cost for the period and recognize a liability for any contributions due at the reporting date – remains unchanged. In addition, this did not change the requirement that an employer apply the recognition, measurement and disclosure provisions for contingencies if an obligation due to withdrawal from a multi-employer plan is either probable or reasonably possible. In such a case, the employer must either accrue a liability and disclose the contingency, or disclose the contingency, as appropriate.
FASB’s initial draft of the guidance included a requirement to include an estimate of an employer’s withdrawal liability during the period of the financial statement. However, in public hearings, many comments surfaced regarding this proposal. Pointing out this would not be an accurate alternative for an employer’s withdrawal liability or contribution obligations to the plan and that such estimate is difficult and time-consuming to obtain.
The revisions became effective for fiscal years ending after December 15, 2011, for public entities, and after December 15, 2012, for non-public entities.
The required disclosures are designed to provide additional financial information to readers of those financial statements. A further question remains as to whether those statements will result in a meaningful change in the perceived value and creditworthiness of the affected contributing employers.
By: Tracie Youngless, CPA
