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GAS 27 Assets

david rigby

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In determining the value of assets for GAS27 purposes, is there any (reasonably) definitive statement whether accrued contributions should be excluded?

I have looked in the EA meeting outlines back to 1998. Found no discussion. Also, I cannot find any explict comment in GAS27 itself.

Points to consider (that I don't wish to overlook):

1. In what year does the plan sponsor record the accrued contribution?

2. Does the auditor have an opinion?

3. In order to avoid "apples and oranges", the contribution(s) in the NPO "roll-forward" should be consistent with whether included in the assets.

Any thoughts?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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  • 2 months later...

An Implementation Guideline was issued in 1997. Paragraph 57 addresses receivables:

"Q: On what evidence should a plan report receivables for contributions from the employer(s), plan members, and others?

A: Receivables for contirbutions should include amounts receivable from the employer(s), plan members, and others (for example, a state making "employer" contributions on behalf of local governments) pursuant to statutory or contractual requirements; and also amounts due based on formal commitments to pay made by the employer(s) or by other entities making contributions on behalf of employers. Evidence of a formal commitment requires some judgment and may include (a) an appropriation by an employer's (or other contributing entity's) governing body of a specified contribution or (B) a consistent pattern of making payments after the plan's reporting date in accordance with an established funding methodology that attributes those payments to the preceding plan year.

The standard indicates that a plan should not recognize a receivable based solely on an employer's recognition of a contribution payable in its financial statements. THis is because Statement 27 requires sole and agent employers to recognize liabilities if annual pension cost is not fully paid. Because annual pension cost is not necessarily equal to the amount charged by the plan to the employer and any difference may not be realizable by the plan in the foreseeable future, the GASB concluded that employer recognition of a liability for unpaid annual pension cost is not, by itself, sufficient fo the plan to recognize a corresponding receivable."

Also, paragraph 58 says that any installment contract (e.g., purchase of service credit over time) should have the full amount be recognized as a receivable at the date of the contract (accrual accounting focus).

In relation to your issue of whether the auditors have any input: Paragraph 51 discusses Statement 27's paragraph 10g: "...to coordinate the actions of the actuaries and financial statement preparers with respect to the resolution of differences that occur between the ARC and actual contributions. The issues are whether the difference will be settled in the short term and, if not, when the difference should begin to be included in the determination of future ARCs for both actuarial valuations and accounting...The actions of actuaries and financial statement preparers in addressing these issues need to be in harmony. Otherwise, the funding and the accounting calculations will diverge and become increasingly different."

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