Action Alert No. 05-51
December 22, 2005

NOTICE OF MEETINGS

December 14, 2005 Board Meeting

Postretirement benefit obligations including pensions. The Board deliberated issues relating to the limited-scope, first phase of its project to reconsider the accounting for postretirement benefits. The Board decided:

  1. That the objectives and scope of phase 1 are as follows:

    1. To improve the reporting of employers' obligations for pensions and other postretirement benefits by recognizing the overfunded or underfunded status of defined benefit postretirement plans as an asset or a liability in the statement of financial position. This means that a sponsoring entity will recognize all previously unrecognized items (such as unrecognized actuarial gains and losses), even when the plan is fully funded.

    2. Not to change how plan assets and benefit obligations are measured under FASB Statements No. 87, Employers' Accounting for Pensions, and No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. The asset or liability (overfunded or underfunded status) would be measured as the difference between the fair value of plan assets and the benefit obligation (that is, the projected benefit obligation (PBO) for pensions and the accumulated postretirement benefit obligation (APBO) for other postretirement benefits).

    3. Not to change the basic approach for measuring the amount of annual net benefit cost reported in earnings.

    4. Implement phase 1 improvements as quickly as possible with a goal of making them effective for years ending after December 15, 2006.

  2. To eliminate the provisions in Statements 87 and 106 that permit plan assets and obligations to be measured as of a date not more than three months prior to the balance sheet (that is, to require entities to report the overfunded or underfunded status measured as of the date of the financial statements).

  3. Not to change the current accounting for defined benefit plans in interim-period financial statements.

  4. To require recognition of an asset for overfunded plans and a separate liability for underfunded plans.

  5. To recognize previously unrecognized items as follows:

    1. Previously unrecognized actuarial gains or losses would be recognized as a charge or credit to other comprehensive income (OCI). Gains or losses recognized in OCI would be recycled out of OCI into earnings based on the amortization and recognition requirements in Statements 87 and 106.

    2. Previously unrecognized prior service costs or credits also would be recognized as a charge or credit to OCI. These items would be recycled out of OCI into earnings based on the amortization and recognition requirements in Statements 87 and 106.

    3. Previously unrecognized net transition assets or obligations would be recognized as an adjustment of retained earnings. Those amounts would not be subsequently recycled through earnings.

  6. To codify into Statement 87 the guidance in Q&A 41 of A Guide to Implementation of Statement 87 on Employers' Accounting for Pensions, that articulates the present requirement to recognize the current and noncurrent portions of the assets and liabilities recognized for postretirement benefits.

  7. Not to require separate line item presentation of amounts recognized in the balance sheet. In making that decision, the Board noted that amounts recognized in OCI would be subject to the separate presentation requirements of FASB Statement No. 130, Reporting Comprehensive Income (that is, classified based on the nature of the item).