FASB 87 & 88 and Freezing of Accruals

[Guest fiddler]

When a db plan freezes accruals there is obviously a curtailment under FAS 88. My question is how to handle the unrecognized transistion asset and the unrecognized gain/loss. Are they both set to zero since there is no expected future service? Also is the Prepaid Pension Cost set to zero?

[ishi]

You must recognize any unrecognized transition amount and any unrecognized prior service cost. The gain created by the curtailment is used to reduced any accumulated LOSS. If the loss is greater than the curtailment gain, no additional amount is recognized in the pension cost. If the gain is larger than the accumulated loss, the accumulated loss is reduced to zero and the excess flows to pension cost. If an accumulated gain exists prior to curtailment, all of the curtailment gain flows to pension cost. The prepaid pension cost is what it is after the above adjustments.

Hope this helps.

[Guest fiddler]

Thanks ishi.