Understanding the new pension math

Article Abstract:

Financial Accounting Standard Number 87 (FAS 87), also known as 'Employers' Accounting for Pensions' (issued by the Financial Accounting Standards Board), is intended to improve footnote disclosure of pension information, and requires companies to report some of their unfunded pension liabilities on their balance sheets. Certain pension accounting principles remain intact, delaying recognition of certain events, net cost reporting, and offsetting assets and liabilities. However, the new reporting methods called for by FAS 87 are complex and require the use of actuarial computations. An example of the calculations needed for a noncontributory defined benefit plan is included in this explanation of the new accounting standards related to pension-providing corporations.

Models, Management, Pensions, Controllership

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FAS 87 - what it means for business

Article Abstract:

Financial accounting standard 87 (FAS 87), Employers' Accounting for Pensions, issued recently by the Financial Accounting Standards Board, will vary in the way it affects business. Recognition of pension expense rather than pension funding is treated by the statement. FAS 87 calls for a single method of funding, the projected unit credit method, so that comparison is easier. In addition, FAS 87 requires faster amortization and breaking down pension costs into components for given periods. A decrease in pension expenses will probably be noted by companies with well-funded plans, while those which do not have well-funded plans may find their balance sheets affected by the requirement to show a liability. 10

Employee benefits, Retirement income

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FAS 105: an industry perspective

Article Abstract:

The Financial Accounting Standards Board's Statement of Financial Accounting Standard 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, covers two types of disclosures: off-balance-sheet financing instruments, and concentration of risk in all financial instruments. Managerial accountants in charge of adopting the standard should review five areas pertaining to financial instruments: assets that have been recorded at less than face value, forward exchange contracts, guarantees, treasury initiated financing instruments, and unconditional purchase obligations.

Corporations

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