SFAS 87 and 132

[david rigby]

Anyone have any additional information?

http://www.plansponsor.com/pi_type10/?RECORD_ID=22021

http://www.fasb.org/board_handouts/08-20-03.pdf

(pages 14-23)

[MGB]

I usually listen to/attend all of the Board meetings, but was at a separate meeting yesterday trying to counter the Administration's proposal to rewrite the funding rules.

You can listen to the actual Board meeting (75 cents a minute) up to 48 hours later, and don't need to listen to any subject other than the pensions (the details are on the FASB site). I plan to listen to it later today.

BNA didn't give much detail this morning, only reporting that they decided no new information on multiemployer plans and that whether or not to apply all of the new rules to post-retirement medical should be left up to general materiality guidelines. It also said they are shooting for a mid-September release of the Exposure Draft and finalized and effective date prior to the end of 2003.

The intriguing part (and why I want to listen) of the article is "The board took a last opportunity to revisit some of the decisions it had made previously on the project and reaffirmed nearly everything, but with some subtle changes, Proestakes noted."

Given that the major changes are these earlier decisions, any change could be huge. Will know more by tonight.

[AndyH]

Zen question of the day,

if the accountants can make the actuaries' lives miserable by issuing burdensome edicts and pronouncements, shouldn't the reverse also be true?

Kinda like an unfunded mandate in political terms. Who wants to pay for this work?

[MGB]

The discussion and reasoning of various issues was much more enlightening and interesting than the actual decisions. For example, they decided that there is no need to disclose market-related value of assets because if you take the expected return and divided it by the assumed rate of return, you can back into the numer. So much for transparency (which is what this project started out as).

The biggest eye-opener was when the board literally threw a fit when the staff mentioned that actuaries would have to do some reprogramming of their systems to get projected cash flow of benefit payments for 10 or 20 years. They harped on this for about 10 minutes that anyone that uses a PV factor to apply to a benefit to get the PBO (or value at decrement), is not following SFAS 87. They were really upset to think anyone uses factors and not complete cash flow projections for determining liabilities. So, the need to reprogram systems will not be an excuse for not being able to report this information on 12/31/03.

Additional decisions on disclosure of:

Nothing new on multiemployer.

No separate threshold requirement on OPEB -- same rules apply.

No measurement date (they couldn't understand why anyone would want to know this); but if significant changes had occurred since the measurement date, then stating the measurement date would be a part of disclosing the significant changes.

No breakdown by line item of where the NPPC ends up in the income statement (although a separate project due next year on performance measurement would break up the service cost and other items into operating income and financing cost).

Forecast of benefit payments (maybe as long as 10, 20, or more years).

Possible deletion of the reconciliation of assets and obligations from year to year, but asking in ED what items from the reconciliation should be kept (e.g., actual benefit payments and contributions for past year).

Expected contributions for next fiscal year, broken down by minimum required and expected discretionary.

If expected contributioins include items other than cash (e.g., the NWA situation with subsidiary stock), a disclosure as to how the value was calculated.

Tabular presentation of the assumptions, breaking out which apply to the cost for the year and which apply to the end of year disclosure.

Quarterly reporting of NPPC (this does not mean it is recalculated each quarter -- what it does mean is that the expected return on assets must be set at the beginning of the year, which it always was supposed to be anyway).

The effective date will absolutely be for disclosures at the end of the calendar year.

Note that there have been many, many more decisions besides these in earlier meetings, such as a breakdown of assets into broad categories with the expected return of each (the weighted average total must equal what is used for cost).

Exposure Draft expected mid-September with an extremely short comment period and final statement applicable by year-end.

[AndyH]

I rest my case. Who wants to pay for this?

And, thanks, MGB, in no way do I mean to minimize the helpfulness of your comments and insight. This just seems like overregulation to the nth power.

Is this nonsense intended to support higher auditing fees for accountants that have clients with DB plans?

Or is it just another way to push clients to terminate their DB plans?

Seems like one or the other to me.

[david rigby]

In case you have not seen it yet, Exposure Draft RE SFAS87/106/132 at

http://www.fasb.org/

[LIBOR]

Following along with FASB topics, has anyone seen/heard anything recently regarding the cost method to be used for Cash Balance plans.

PUC,TUC, or something else ? there was a fair amount of discussion on this at the EA meeting in March.