Mercer Raises 'Concerns' Around FASB Accounting Rule Proposals

Intended to address ” perceived deficiencies” indisclosures about defined benefit and other postretirement plans, t he FASB proposals would require the disclosure of information for each “major category” of plan assets, at the broadest level, equity securities, debt securities, real estate and all other assets for companies that sponsor a pension plan (See  FASB Throws Down Pension Reporting Gauntlet ).   Additionally, disclosure by narrower asset categories and additional information about specific assets within a category would be encouraged if that information is expected to be useful in understanding the investment risks or expected long-term rate of return on assets, according to a news release.

However, what caught the raised eyebrow of Mercer, is the lack of turnaround time for employers to comply.   FASB has set a target compliance date of December 15, 2003 for the new rules to take effect and reporting based on the new regulations for 2003 annual reports.

Mercer’s Beef

The consultancy sees complications to the proposal on many different fronts, most of which deal with the excess burden, both in terms of cost and the time involved, FASB’s proposals would suddenly place on companies.   Among those concerns is that firms would have to obtain the newlyrequired disclosure information regarding multiple plans in several countries. Mostcompanies will not start gathering data until the standard is finalizedandthey know exactly what is needed. This will make it particularlydifficult t o comply with 2003 financial statements. 

Alarms bells go off even louder for Mercer when the FASB proposals are measured with the Security and Exchange Commission’s (SEC) accelerated 10-K filing deadline, also effective this year. “Mercer understands the need for transparent accounting and reporting among public companies. But we are also very concerned that more time be given for consideration of the content of the disclosures,” says the head of Mercer’s Western retirement practice Chuck Longiotti.    To that, Mercer believes that while some of the new information is readily available and clearly has value to investors, the value of other new disclosure items would not be commensurate with a company’s added cost of compliance.

In order to make sure its voice is heard, and ultimately effect change in FASB’s effect date, Mercer and several of the firm’s clients plan on submitting these concerns in writing to the nation’s accounting rulemaking body before the end of the October 27 public comment period.   Interested clients are encouraged to join in the campaign and can view a copy of the letter at  www.mercerHR.com .