March 10, 2017

The Financial Accounting Standards Board has released an update to improve the financial reporting on pensions and other post-retirement benefits.

The changes in the accounting standards update released Friday by FASB pertain to the presentation of defined benefit costs in the income statement.

Under U.S. GAAP, the defined benefit pension cost and the post-retirement benefit cost (net benefit cost) include a number of components that reflect various aspects of an employer’s financial arrangements, along with the cost of the benefits given to employees. Those components are supposed to be aggregated when they are reported on the financial statements.

However, FASB heard from many of its constituents that the presentation of defined benefit cost on a net basis combines elements that can be quite different. They argued the current presentation requirement is not as transparent as it should be and it decreases the usefulness of the financial information. They contended that it required users to incur bigger costs when they analyzed financial statements.

Under U.S. GAAP, the defined benefit pension cost and the post-retirement benefit cost (net benefit cost) include a number of components that reflect various aspects of an employer’s financial arrangements, along with the cost of the benefits given to employees. Those components are supposed to be aggregated when they are reported on the financial statements.

However, FASB heard from many of its constituents that the presentation of defined benefit cost on a net basis combines elements that can be quite different. They argued the current presentation requirement is not as transparent as it should be and it decreases the usefulness of the financial information. They contended that it required users to incur bigger costs when they analyzed financial statements.

[Accounting Today]