Employee benefit plans — FASB proposes to simplify accounting under ASC 960, ASC 962, and ASC 965
On April 23, 2015, the FASB issued three proposed Accounting Standards Updates (ASUs) based on decisions by the Emerging Issues Task Force (EITF) that would simplify the accounting and financial reporting by employee benefit plan reporting entities within the scope of ASC 960, ASC 962, and ASC 965.1 Comments on the proposed ASUs are due by May 18, 2015.
The proposals contain narrow amendments related to (1) the measurement of fully benefit-responsive investment contracts (FBRICs), (2) certain disclosure requirements for plan assets, and (3) a measurement-date practical expedient for plan assets.
Proposed ASU on Measurement of FBRICs
Under this proposal,2 plan reporting entities within the scope of ASC 962 and ASC 965 would no longer need to measure FBRICs at fair value but rather at contract value only. The amendments would also remove many of the disclosure requirements for FBRICs in ASC 962 and ASC 965. The guidance would be applied retrospectively to all periods presented beginning in the fiscal year of adoption.
Proposed ASU on Disclosure Requirements for Plan Assets
This proposal3 would amend disclosure requirements for plan assets by employee benefit plans within the scope of ASC 960, ASC 962, and ASC 965 as follows:
- Plan assets would need to be disaggregated only by general type within the statement of net assets available for benefits. The plan would not be required to provide the disclosures by investment class in accordance with ASC 820-10-50.4
- Participant self-directed brokerage accounts would be presented in the aggregate as a single "general type" of plan asset.
- For a plan asset measured at the net asset value practical expedient permitted by ASC 820-10, if that investment is in a fund entity that directly files Form 5500 with the U.S. Department of Labor, the plan would not be required to disclose the investment strategies for that investment.
- Plan assets that account for 5 percent or more of net assets would no longer need to be listed individually.
- Disclosures of net appreciation or depreciation for each general type of plan asset would no longer be required; however, plan asset appreciation or depreciation would still need to be disclosed in the aggregate.
The guidance would be applied retrospectively to all periods presented beginning in the fiscal year of adoption.
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Editor’s Note: ASU 2015-07,5 issued on May 1, removes the requirement to present certain investments for which the practical expedient is used to measure fair value at net asset value within the fair value hierarchy. Instead, an entity would be required to include those investments as a reconciling line item so that the total fair value amount of investments in the disclosure is consistent with the amount on the balance sheet. ASU 2015-07 is effective for interim and annual periods beginning after December 15, 2015 (entities that are not public business entities are granted an additional year), and early adoption is permitted. The ASU applies to employee benefit plan reporting entities. |
Proposed ASU on Measurement-Date Practical Expedient
This proposal6 would permit employee benefit plans within the scope of ASC 960, ASC 962, and ASC 965 to elect a practical expedient allowing them to use, as an alternative measurement date for plan assets (and investment-related accounts — e.g., a liability for a pending trade with a broker), the month-end date closest to the plan’s fiscal year-end. Any contributions, distributions, or other significant events occurring between the employee benefit plan’s fiscal year-end and the alternative measurement date would need to be disclosed.
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Editor’s Note: The proposed ASU provides a practical expedient similar to the one in ASU 2015-047 for an employer’s defined benefit plan assets and obligations.. Although an employer would be required to adjust its financial statements for plan contributions, distributions, and other significant events between the fiscal year-end and the alternative measurement date, an employee benefit plan reporting entity would need only to disclose these transactions and events. |
The guidance would be applied prospectively to all periods presented beginning in the fiscal year of adoption.
Next Steps
The EITF will redeliberate the proposals at its June 18, 2015, meeting. The FASB could issue final guidance in late July 2015 if the EITF reaches a final consensus at the meeting. The EITF will discuss the effective dates of the proposals, and whether early adoption should be permitted, after receiving feedback from stakeholders.
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1 For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s "Titles of Topics and Subtopics in the FASB Accounting Standards Codification."
2 FASB Proposed Accounting Standards Update, Fully Benefit-Responsive Investment Contracts.
3 FASB Proposed Accounting Standards Update, Plan Investment Disclosures.
4 ASC 820-10-50-2B(a) requires investments to be disaggregated by their “nature, characteristics, and risks.”
5 FASB Accounting Standards Update No. 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) — a consensus of the FASB Emerging Issues Task Force.
6 FASB Proposed Accounting Standards Update, Measurement Date Practical Expedient.
7 FASB Accounting Standards Update No. 2015-04, Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.
