FASB Announces Changes to DB Plan Disclosure Requirements

The Financial Accounting Standards Board (FASB) is making changes to the disclosure requirements for defined benefit (DB) plans.

In Accounting Standards Update 2018-14, the FASB says the objective and primary focus of the changes are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by generally accepted accounting principles (GAAP) that is most important to users of each entity’s financial statements.

The following disclosure requirements are removed from Subtopic 715-20, Compensation—Retirement Benefits—Defined Benefit Plans—General:

• The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.
• The amount and timing of plan assets expected to be returned to the employer.
• The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.
• Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.
• For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets.
• For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

The following disclosure requirements are added to Subtopic 715-20:

• The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates.
• An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

The amendments in the update also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

• The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets
• The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

The amendments in the update are effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities. An entity should apply the amendments on a retrospective basis to all periods presented.