FAS87 - change in accounting methodology?

[Guest guppy]

Client has not historically recognized the current year's liability gain/loss to determine the amortizable amount in the NPPC. For example:

- The Fiscal year is calendar year

- 12/31/02 disclosed PBO = $100 (based on 1/1/02 census)

- 1/1/03 PBO = $110 (based on 1/1/03 census)

- Therefore, liability loss = $10

Assuming PBO exceeds MRV, the corridor the client currently uses is: $10. I would argue that it's more appropriate to use $11. Valuation software supports my approach.

Questions: Is the current approach even acceptable under GAAP? Is changing to my preferred method a change in accounting method I need to have approved by the auditors? Note that in my specific situation, by making the change I'm reducing the expense since I'm creating a larger corridor and deferring more of the outstanding loss.

I'm not sure if these even has any impact on your opinion, but the interest cost is determined using the $110 PBO, ie. the new census is reflected in the service cost and the interest cost.

Let me know your thoughts. Thanks.

[Guest DBtech]

Guppy, I agree with your interpertation. See paragraph #32 of FAS 87. It specifically refers to "as of the beginning the year." In your example the 110 PBO is a BOY number and the 100 PBO is an EOY number.

[david rigby]

11.00

[Guest guppy]

Thanks for the replies...