FAS 158 late adoption

[Mister Met]

If an employer were to adopt FAS 158 late (meaning, now), how would this be accounted for? Would it be a transition obligation going back to when it should have been adopted? Or something else?

[Rball4]

Are they adopting FASB for the first time, or have they not yet converted from FASB 132? Also, are you on the actuarial or accounting side?

[My 2 cents]

On a couple of occasions, clients for whom we had not been providing accounting information in accordance with FASB would ask us to start providing them information in accordance with the current accounting standards. In general, we would usually wind up using a current transition date. I don't think accountants usually require the virtually impossible task of trying to recreate accounting calculations for the past 25-30 years.

Granting that it is possible that we have failed to take note of some aspects of changes in the accounting standards, wouldn't FAS 87 be roughly the same as FAS 87 as modified by FAS 132R as modified by FAS 158 as reworked by ASC 715? Sure, there is more done with getting unrecognized values into the sponsor's financial reporting and some added disclosure information and some differences in presentation, aren't the items to calculate and their usage pretty much unchanged? In going from FAS87/132R/158 to ASC 715, is there any material change?

[david rigby]

Hmmm. "Transition" refers to a change of accounting policy, so it is effective on the date of adoption. Of course, if the accountant told me to apply it retroactively, I would do so, but that implies restating the plan sponsor's financial statements retroactively (which is not likely). BTW, the accountant gets to decide whether it's material.

In SFAS No. 158, see paragraph 16. In SFAS No. 87, see paragraph 77.

[My 2 cents]

Granted - FAS 158 requires inclusion of unrecognized gains and losses etc. in Accumulated Other Comprehensive Income, so that the net effect of sponsoring the plan on the financial position of the employer equals the difference between the PBO and the assets, which was not how things were handled under FAS 87.

Wouldn't it be the case that if a company had been accounting for the plan under FAS 87, when FAS 158 became effective (years ago!), the company's accounting would have recognized that change? While there have been situations where the sponsor had not accounted for the plan under FAS 87/132R/158 at all but then started to do so, I cannot recall seeing anyone having gotten stuck in the middle, following 87 and 132R but not 158 for any length of time after 158 became effective.

Other than nomenclature, has anyone noticed any meaningful distinctions between FAS 158 and ASC 715? Wouldn't a proper FAS 158 report only require some rewording of the text to become a proper ASC 715 report?

[Mister Met]

They have been reporting on FASB basis, just didn't convert from FAS 132R. On the actuarial side.

[Rball4]

Then it's up to the accountant to tell you what to do. Specifically, do they want to just make the change now and add the FAS158 transition line item (like we did for most plans years ago), or do they want to go back to x number of years to fix the past financials? Also, are they using the old 3-month prior to fiscal year end measurement date?

[My 2 cents]

If the change is from FAS 132 (keeping unrecognized items unrecognized) to FAS 158 (having the net financial impact of the plan equal the assets minus the PBO), wouldn't you pretty much wind up at the same place (current net impact = assets-PBO) whether one restated the past few years or just made the jump now? Sure, prior years might look very different, but even then this year's AOCI less this year's prepaid (or plus this year's accrued) would equal the PBO - the assets, just as they would if only the current year was to be affected.

Still don't really understand why the accountant would have continued to follow 132 and not 158. Wouldn't that be something like continuing to fund the plan using pre-PPA rules?

[Rball4]

The conversion for some plans had no effect. But for other plans, there was a big change in the AOCI calculations between FAS 132 & 158. Getting rid of the AML and Intangible Assets and now just aggregating the unrecognized amounts made the AOCI significantly different for some plans. Also, FAS 132 allowed you to use a 3-month lookback for the measurement date, whereas only fiscal year end can be used for FAS 158 calculations.

The biggest change of course relates to the fact that the DB plan figures are no longer just in the footnote of the financials. They are now recognized on the balance sheet.