Global Standard for Pension Accounting?

[Chester]

I was wondering if anyone knew how the meeting went last week between the FASB and the IASB regarding the future direction of pension accounting in the U.S. At the Enrolled Actuaries meeting it was mentioned that the meeting in London last week would determine if the FASB and IASB would put the pension accounting standards on a fast track for globalization of standards. Since the U.K. bases pension accounting on immediate recognition of gains and losses and marking to market, any move in the U.S. to such a method could pose huge problems for the continued maintenance of DB plans. Any info would be greatly appreciated.

[david rigby]

Here is some information:

http://www.plansponsor.com/pi_type10/?RECORD_ID=25215

[MGB]

I was that person "mentioning" this at the EA Meeting session on International Standards.

The IASB/FASB didn't go as far as I expected. It was a loose, tentative agreement to do a joint project, rather than an explicit putting it on the agenda. I think the next step is the FASB Board needs to formally vote on doing the joint project, then it will be put on the agenda.

The FASB will definitely scrap SFAS 87 and go with IAS 19 at some point. The only question is when. If they do not do the joint project, then the IASB will introduce their new IAS 19 at some point in the next year or two. Once it is in place, then the FASB would steer towards convergence with it, probably by the end of the decade.

However, instead of doing it that way, these discussions of a joint project greatly accelerate that timetable. Under a joint project, the new IAS 19 would be adopted by both the IASB and FASB at some point in the next couple of years and there would be no later convergence issue to deal with.

Also note that "marked to market" and "immediate recognition of gains and losses" under a comprehensive income reporting structure is not the same as putting these things into a profit and loss statement (called the net income statement in the US). Those kind of volatile changes should be thought of as more like the additional minimum liability direct charge to surplus that we now have. Yes, there will be volatility in the balance sheet, but no, it will not cause volatility in operating income.

[Chester]

Thanks much Pax and MGB. It sounds like we will have to watch what the FASB Board decides to do with this tentative agreement.

[MGB]

Today's FASB Action Alert added a slightly different take on the subject (adding the issue of "resources being available") in their description of the IASB/FASB meeting:

"The Boards discussed potential major projects that might be added to the joint agenda. The Boards agreed that projects on accounting for leasing, employee benefits, and intangible assets should be considered for admission to the joint agenda as resources become available. The Boards did not, however, discuss the relative priorities of those important improvement projects."

From: http://www.fasb.org/action/aa042904.shtml

The other thing I found interesting in this posting is that they will only get around to a "public discussion document" on comprehensive income reporting by mid-2005. The Exposure Draft (something that is well beyond a discussion document)on this was originally scheduled for fourth quarter of 2003. The new IAS 19 needs to have this project done before it properly fits into the future structure.