FAS 87 year end disclosure

[Guest lisbetf]

I am getting conflicting definitions of some line items in the FAS 132 exhibit. Can someone tell me what the "Accrued Benefit Liability" is? Is it the greater of the unfunded ABO and the Accrued Pension Cost or is it the Accrued Pension Cost?

Help!:confused:

[FAPInJax]

The ABO (Accrued Benefit Liability) is the present value of the accrued benefit (using the Unit Credit cost method). The difference is that it is calculated using NO increase in future compensation levels (this includes assumptions regarding social security, etc.). It is intended to provide information IF the plan is discontinued.

The one tricky thing is that the other discounts will show up in the present value (for example turnover, etc.)

Hope this helps!!

[Guest lisbetf]

Hey Frank, I haven't spoken to you in a long time...hope all is well.

I am referring to the FAS 132 exhibit under the section titled

Amounts recognized in statement of financial position consist of:

Prepaid benefit cost

Accrued benefit liability

Intangible asset

Accumulated other comprehensive income per fas 130

Net amount recognized

Does your answer change? Thanks for your help.

Lisbet

[FAPInJax]

I do not know about FASB 132 (it should be the same as their other announcements). I will let more knowledgeable users about 132 provide some commentary. (I will see what I can find in the meantime)

[MGB]

It is the additional minimum liability (=ABO-assets-accrued expense on books). (A review of any of the example disclosures in SFAS 132 should convince you.)

Don't ask me why SFAS 132 used different terminology than the definition of the calculation under SFAS 87 (which defined it as "additional minimum liability").

[Guest Doug Goelz]

I disagree with MGB. The Accrued Benefit Liability is the liability that would be posted to a company's balance sheet due to the pension plan. It is not just the additional amount that must be recognized due to an unfunded ABO.

For example, consider a company with the following amounts:

ABO = 1,000

PBO = 1,500

Assets = 500

Funded Status = (1,000)

Unrecognized Transition = 0

Unrecognized PSC = 0

Unrecognized (gain)/loss = 700

(Accrued)/Pre-Paid pension Cost = (300)

In this case, the company must book the unfunded ABO to their balance sheet. This amount would be 500. However, the Additional Minimum Pension Liability would only be 200 -- which in this example would reduce equity via the Accumulated Other Comprehensive Income (AOCI).

The FAS 132 Disclosure would look like:

Prepaid benefit cost = 0

Accrued benefit liability = (500)

Intangible asset = 0

AOCI = 200

Net Amount Recognized at year-end = (300)

[Guest BDZ]

The example with respect to the SFAS 132 is very helpful.

I have a similar situation in which there is not an unrecognized transition obligation nor an unrecognized prior service cost. However, there is a pre-paid pension cost prior to recognition of the additional minimum liability rather than an accrued pension cost.

Example:

ABO = PBO = 1700

Assets = 1600

Funded Status = (100)

Unrecognized net loss = 180

Pre-paid pension cost prior to recognition of additional min. liability = 80

Is FAS 132 disclosure?

Prepaid benefit cost = 0?

Accrued benefit liability =100

Intangible asset = 0

AOCI = 180

Net amount recognized at year end = 80

If so, what does the "Prepaid benefit cost" under the FAS 132 disclosure represent?

:confused:

[david rigby]

My understanding of FAS87/132 disclosure using the facts given by BDZ:

Prepaid Benefit Cost = $80

(Accrued Benefit Liability) = (180)

Intangible Asset = N/A

Accumulated other

comprehensive income = 180

Net amount recognized = $80

The "prepaid benefit cost" is (and has always been) the accumulated difference between actual contributions and NPPC. It is called "prepaid" because it is positive; an "accrued benefit cost" is negative.

[Guest Doug Goelz]

I disagree with PAX's disclosure. All the disclosures I have ever seen would present it the way you did BDZ.

The purpose of the "Amounts Recognized in the Statement of Financial Position Consists of" section of a footnote disclosure is to give the bottom line of the funded position of the plan and any reduction in equity that occurred during the year. The net amount recognized represents the cumulative difference between funding and expense since the inception of the company (similar to the credit balance on the Schedule b). Posting the unfunded ABO as the Accrued Pension Cost is in accordance with the FAS 87 statement. If there was no unfunded ABO in your example, there would be an entry under the Pre-Paid Cost. You would have to look at the accountant's journal entries and/or ledger to see how the numbers change for each item on the balance sheet when your plan has an unfunded ABO.