Question

CE20.4 What information about its pension plan must a publicly traded company disclose in its interim financial statements?

Answer 1

Solution:-

CE20.4 What information about its pension plan must a publicly traded company disclose in its interim financial statements:-

Statement no. 132 requires employers that sponsor one or more defined benefit pension or other postretirement benefit plans to disclose the following in their financial statements:

• A reconciliation of beginning and ending balances of the benefit obligation, which refers to the entity's projected benefit obligation (PBO) under Statement no. 87 or its accumulated postretirement benefit obligation (APBO) under Statement no. 106. Employers no longer have to disclose the separate components (for fully eligible active employees, other active employees and retirees) of the APBO. For pension plans, employers no longer must disclose the vested benefit obligation and the accumulated benefit obligation. (For an exception for employers with more than one plan, see the following section.)
  
• A reconciliation of beginning and ending balances of the fair value of plan assets. Nonqualified pension and other postretirement benefits plans frequently do not have separate plan assets. Instead, payments are made from the plan sponsor's general assets. Statement no. 132 does not give special disclosure requirements for these cases. Employers should still show a reconciliation, even though there would be no return on assets and the beginning and ending values would be zero.
  
• The plans' funded status, including the amounts recognized and not recognized, in the statement of financial position.
  
• The amount of net periodic benefit cost recognized. Although the actual return on assets (ROA) and the net amortization and deferral no longer are presented as components of net periodic pension cost, employers must show the expected ROA as well as the amortization components for the unrecognized transition obligation or asset, the prior-service cost and the gain or loss individually.
  
• The amount included within other comprehensive income for the period, which refers to the change in the additional minimum pension liability recognized under paragraph 37 of Statement no. 87.
  
• On a weighted-average basis, the assumptions used in accounting for the plans, including the discount rate, salary scale and expected long-term rate of return.
  
• The assumed health care cost trend rates, which include the rate for the next year; a general description of the direction and pattern of change in the assumed trend rates in subsequent years; the ultimate trend rates and when those rates are expected to be achieved.
  
• The effect of a 1% change (both increase and decrease) in the assumed health care cost trend rates.
  
• The amounts and types of securities of the employer and related parties included in plan assets, if any.
  
• Any alternative method used to amortize prior-service amounts or unrecognized net gains and losses.
  
• Any substantive commitment used as the basis for accounting for the benefit obligation, such as a history of regular benefit increases that are not specified in a written document but that are expected to continue.
  
• The cost of providing any special or contractual termination benefits, including a description of the nature of the event.
  
• An explanation of any significant change in the benefit obligation or plan assets not otherwise apparent in other disclosures.

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