Accounting rulemakers considered and quickly rejected an idea to establish some new disclosures related to recent legislation requiring companies to bulk up contributions to underfunded pension plans.
The Financial Accounting Standards Board met last week to debate whether it should open a new project to look at disclosure requirements surrounding defined-benefit pension plans in light of the Pension Protection Act of 2006—which takes effect in 2008—to establish a timeline by which companies with underfunded plans must contribute more money toward meeting their pension obligations.
The FASB staff gave the Board a few different alternatives to consider, including mandating companies disclose the actual or estimated contributions they’ll be required to make over the next five years to comply with the new legislation and describe how those requirements differ from their financial reporting requirements.
Seidman
“I think this is something companies should talk about in their financial statements, but the question is whether there are existing requirements,” said FASB member Leslie Seidman during the meeting. “This particular item has significant forward-looking information in it. The disclosure requirements in existing MD&A [the Management’s Discussion and Analysis section of period reports] are adequate to cover those requirements.”
Concern was raised during FASB’s meeting about whether companies are complying with existing requirements, but Seidman and others said enforcement is not the FASB’s mission. “Whether people comply with it is a matter best left to the SEC [Securities and Exchange Commission],” she said.
The Board voted 6-1 to take no action. “The Board felt SEC’s guidance in MD&A was sufficient and they didn’t want to be redundant by creating redundant requirements,” said spokesman Gerard Carney.
The week prior, FASB finalized a new statement to require companies to state their pension liabilities or assets on the face of the balance sheet instead of burying them in footnote disclosures (see related coverage above, right). Still ahead, FASB has promised to take a second-phase, comprehensive look at pension accounting rules in an upcoming project. The board has not yet started the promised second phase.
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