Financial Reporting Alert 16-2, Employers’ accounting for defined benefit plans — Alternatives for applying discount rates in the measurement of benefit cost under a bond-matching approach

Published on: Aug 31, 2016


In an August 2, 2016, meeting with representatives of the Big Four accounting firms and a large actuarial firm, the SEC staff stated that it objected to a proposed approach to adapting bond matching that would facilitate the use of a spot rate method for measuring interest cost. Under this approach, the implied spot rates at each maturity that are present in the entity-specific hypothetical bond portfolio for the measurement of the interest cost component of net periodic benefit cost would be derived and used in a manner similar to the spot rate approach. This alert provides further background on this topic and describes in greater detail some of the relevant considerations in connection with the proposed approach.


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