Accounting board to require quarterly reports on pensions

Accounting board to require quarterly reports on pensions
ARDEN DALE, Dow Jones Newswires
Wednesday, June 25, 2003
©2003 Associated Press

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2003/06/25/financial1425EDT0171.DTL

(06-25) 11:25 PDT (AP) --

NORWALK, Conn. (Dow Jones/AP) -- Companies with defined-benefit pensions would for the first time have to issue quarterly financial reports on their plans under a decision Wednesday by the nation's accounting rules setter.

The Financial Accounting Standards Board tentatively ruled that public and private companies alike will have to tell investors and analysts whether they expect to change the amount they will contribute to a plan in a given year.

Among the other data they will have to reveal are details about their investment returns and information about where their pension costs are concentrated throughout the company.

Currently, companies are only required to provide financial statements on retirement plans once a year.

FASB's board decided not to require retirement plan sponsors to provide projections of how their pension assets and liability would be effected by fluctuations in interest rates or equities markets.

Some analysts, lenders and others have asked for such projections, often called "sensitivity analyses," over the past months. But FASB decided not to require them partly because they would be quite speculative and therefore possibly misleading. Specifically, the sensitivity analyses could have involved calculating how much pension plan benefit obligations would expand should interest rates rise -- or fall -- by a certain number of points, among other scenarios.

The FASB's decisions Wednesday are expected to become part of new pension disclosure rules that could go into effect as early as the end of this year.

Peter Proestakes, FASB's pension project manager, said the group hopes to have a draft of the new rule out by August.

FASB's board also decided Wednesday that companies should report the amount they expect to pay in future benefits as a dollar amount, rather than a formula based on bonds with which benefit obligations are calculated.

The FASB's project to increase pension disclosure began in March, when it said it would conduct a formal review of pension accounting rules. The FASB began mapping out a plan for improving disclosure, and approved a preliminary list of a dozen pension reporting issues that should figure in its effort.

The project was prompted, in part, by growing concern on the part of lawmakers and financial firms over underfunded corporate pension plans.

Pension rules, spelled out in an FASB regulation known as FAS 87, attracted attention as more companies late last year and in 2003 reported that their plans were underfunded, sometimes by billions of dollars.

Since last year, many companies including General Motors Corp., Ford Motor Co., and International Business Machines Corp. have announced in earnings-related statements that they would contribute millions, or even billions, to their funds. The contributions have had an impact on earnings in some cases.