FAS 158 - Assets exceeding PBO

[AndyH]

I'm passing along this question and unfortunately I don't have the exact terminology in front of me.

If a plan has an excess of PBO to Assets the shorftall is a balance sheet debt, right?

If a plan has an excess of Assets to PBO is that a balance sheet asset? Or does the term "non-current asset" apply and make the answer no?

[AndyH]

No takers?

[Andy the Actuary]

I believe any excess/deficit would be reported as an equity item under "other comprehensive income." However, some entitites, such as insurance companies, are subject to reporting requirements of other governing bodies (in the insurance company's case, the NAIC - National Association of Insurance Commissioners). Presently, prior to FASB158, any asset is nonadmitted. Consequently, it is reasonable to believe that any liabiability (at least, in excess of the ABO) would not be recorded. The NAIC has not yet adopted FASB158 as best as I can tell.

[Guest Grant]

Andy and Andy,

My understanding is that FAS 158 requires any excess of Assets over PBO to be a Net Pension Asset on the balance sheet. It would be classified as Noncurrent.

Whether a Noncurrent asset doesn't "count" or is not really an asset may be in the eye of the beholder.

[AndyH]

Thanks for the replies.

Here's a definition of current and noncurrent assets from investorwords.com

Current Asset:

A balance sheet item which equals the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year. A company's creditors will often be interested in how much that company has in current assets, since these assets can be easily liquidated in case the company goes bankrupt. In addition, current assets are important to most companies as a source of funds for day-to-day operations.

Noncurrent Asset:

An asset which is not easily convertible to cash or not expected to become cash within the next year. Examples include fixed assets, leasehold improvements, and intangible assets. opposite of current asset.

I'd be interested in any further explanations as to how these differ on financial statements.