a roadmap to the accounting and regulatory aspects of … · 5 internal revenue service. 6 aicpa...

A Roadmap to the Accounting and Regulatory Aspects of Postretirement BenefitsIncluding an Overview of Statement 158

Portions of various FASB documents, copyright by the Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, are reproduced with permission. Complete copies of these documents are available from the FASB.

This publication is provided as an information service by the Accounting Standards and Communications Group of Deloitte & Touche LLP. It does not address all possible fact patterns and the guidance is subject to change. Deloitte & Touche LLP is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte & Touche LLP shall not be responsible for any loss sustained by any person who relies on this publication.

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Acknowledgments iv

ExecutiveSummary v

Introduction 1

BenefitsandPlans 3

Funding/ManagementofPlanAssets 13

StatutoryConsiderations 17

Accounting 23

AppendixA—GlossaryofTerms 43

AppendixB—Statement158QuestionsandAnswers 53

AppendixC—AuthoritativeLiteratureonPension,Postretirement,andTerminationBenefits 73

AppendixD—Statement158ImplementationGuidance 81

AppendixE—SampleDisclosuresUnderStatement132(R)(asAmendedbyStatement158) 101

AppendixF—SECManagement’sDiscussionandAnalysisDisclosureGuidance 109

AppendixG—U.S.GAAPAccountingandDisclosureComplianceChecklist 113

AppendixH—ComparisonofU.S.GAAPandIFRSs 173

AppendixI—Resources 177

AppendixJ—Abbreviations 179

Contents

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Acknowledgments

Thispublicationistheresultofacollaborativeeffort,bringingtogetherthethoughtfulleadershipofourassurance,tax,andconsultingprofessionals.WearegratefulforthecontributionsofPhilCallif(retiredpartner),NaomiErickson(retireddirector),BrianMaloney,MarthaPriddyPatterson,VinceSmith,JohnStokesbury,andTomVeal.DawnTrapanisupervisedtheoverallpreparationofthispublicationandwouldliketoacknowledgethecontributionsoftheseprofessionals,extendingtothemherdeepestappreciation.

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Executive Summary

Thispublicationsummarizesthecommontypesofpostretirementbenefits,theirfundingrequirements,andassociatedstatutoryandaccountingguidance.Thebookisdividedasfollows:

Benefits and Plans Onewayforemployerstorecruitandretaindesiredemployeesistoprovidepostretirementbenefits.Thesebenefitscanbesubdividedintwodifferentways:(1)definedbenefitversusdefinedcontributionand(2)pensionbenefitsversusotherpostretirementbenefits.Thissectiondiscussesthevariousplans,distinguishingbetweenthemfortax,regulatory,andaccountingpurposes.

Funding/Management of Plan AssetsThefundingofpostretirementbenefitscontinuestogarnermediaattentionbecauseofconcernsoverthePensionBenefitGuarantyCorporation’sdeficitandtheabilityofemployerstomakegoodontheirpensionandotherpostretirementobligations.Thissectiondiscussesthefundingandmanagementofdefinedcontributionplansanddefinedbenefitplans,includingInternalRevenueServiceandEmployeeRetirementIncomeSecurityActconsiderations.

Statutory ConsiderationsAsubstantialbodyofregulationgovernsthefundingandmanagementofpostretirementplans.Considerationshouldbegiventotheseregulationsinplandesignaswellasinanysubsequentplanamendmentsorchanges.Theseregulatoryrequirementsalsoshouldbeconsideredindeterminingtheappropriateaccountingforthebenefitobligations.Thissectionsummarizesthekeyreferencepointsfortheregulatoryrequirements,includingthePensionProtectionActof2006,andtheregulatoryprocessesthatunderlietheU.S.systemofbenefitregulation.

Accounting Thissectionoutlinestheexistingaccountingmodel,includingrecentlyissuedstandardsandimplementationguidance.AlsohighlightedaretheSECstaff’sviewsoncertainaspectsofpostretirementbenefitaccounting.

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AppendixesThesearesourcesfortheaccountinganddisclosurerequirementsofpostretirementbenefitsandincludethefollowing:

InterpretivequestionsandanswersregardingFASBStatementNo.158,Employers’AccountingforDefinedBenefitPensionandOtherPostretirementPlans—anamendmentofFASBStatementsNo.87,88,106,and132(R).

Statement158implementationguidance.

U.S.GAAPaccountinganddisclosurechecklistforpostretirementbenefits.

ComparisonoftheaccountingforpostretirementbenefitsunderU.S.GAAPandIFRSs.

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Executive Summary PostretirementBenefits

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IntroductionTheyear2006broughtmajoraccountingandregulatorychangesforpensionandotherpostretirementbenefits.Employersfacenewrequirementsforbalancesheetreportingofpensionandotherpostretirementbenefitobligations.1Moreover,newlawsandregulationsregardingthetypesofbenefits2thatemployerscanprovidetoemployees,andhowthesebenefitsmustbefunded,willmostlikelyresultinsubstantialmodificationsinbenefitplansandinthetimingofcontributionstoplantrustsintheimmediatefuture.3

TheFinancialAccountingStandardsBoard(FASBor“Board”)hasalreadymadesignificantchangestoitsstandardsforpensionandotherpostretirementbenefits.Thestandardsnowrequirerecognition,intheemployer’sstatementoffinancialposition,ofthefunded statusofadefinedbenefitplanandchangestoamountsrecognizedinothercomprehensiveincome(OCI).Anotherchangeistherequirementtomeasuredefinedbenefitplan assetsandobligationsasofthedateoftheemployer’sfiscalyear-endstatementoffinancialposition.4TheBoardhasalsomaderelatedchangestodisclosurerequirements.

Andmorechangesareontheway.IssuedinSeptember2006,Statement1585wasjustthefirststepoftheBoard’sprojecttocomprehensivelyreconsiderguidanceinStatements87,88,106,and132(R).Atthebeginningof2007,theBoardincorporatedtheFASBStaffImplementationGuidesonStatements87,88,and106asappendixestotherespectiveStatements,therebyelevatingtheImplementationGuidestoLevelAgenerallyacceptedaccountingprinciples(GAAP).6

ThesecondphaseoftheBoard’sprojectisexpectedtotakeseveralyearstocompleteandwilladdress,amongotherthings,incomerecognitionanddisplayingthecostofprovidingpostretirementbenefits,measurementofemployers’benefitobligations,andwhetherpostretirementbenefittrustsshouldbeconsolidatedinthefinancialstatementsofplansponsors.TheBoardalsointendstoaddresstheaccountingfornewtypesofplans,suchascashbalanceplans.Whiletheprimaryfocusofthechangestotheliteratureisonpensionandotherpostretirementbenefits,thesechangeswillalsoaffecttheaccountingforpostemploymentbenefits.7

1 Companies with publicly traded equity securities were required to adopt the recognition provisions of Statement 158 as of the end of the fiscal year ending after December 15, 2006, with all other companies adopting as of the end of the fiscal year ending after June 15, 2007.

2 Words that appear in boldface type are defined in Appendix A. 3 The new laws and regulations discussed herein apply to domestic benefit plans and may not affect plans outside the United States.4 The measurement date provisions of Statement 158 are effective for fiscal years ending after December 15, 2008.5 Throughout this publication, short forms of the standards related to pension and other postretirement benefits are used. For the full citations, see Appendix C.

6 The GAAP hierarchy is contained in AICPA Statement on Auditing Standards No. 69 (AU Section 411), The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.

7 See Q&A 2-1 in Appendix B for more information.

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Accountingforpensionandpostretirementobligationsremainschallengingforplansponsors,particularlythedeterminationofplanassumptions.Inaddition,employersarecontinuingtoevaluateandmodifytheircompensationpracticesandstrategies.Whilestandardsettersandotherscontinuetodiscusstheseimportanttopics,wewillcontinuetoprovideyouwithourinsights.

WehopethatthisRoadmapwillproveausefulguidetounderstandingthecomplexandever-changingworldofpensionsandpostretirementbenefits.

Introduction PostretirementBenefits

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Benefits and Plans

Employersgenerallyprovidepostretirementbenefitsaspartoftheirtotalcompensationpackagetorecruitandretaindesiredemployees.Recruiting,training,andturnovercanbecostly,soemployersneedtobesurethatthebenefitstheyprovideareappropriateto,andunderstoodby,theiremployees.

Effectivelydesigningemployeebenefitplansrequiresanunderstandingof(1)theemployeepopulationanditsneeds,(2)otherformsofcompensationprovided,(3)theemployer’sownconstraints,and(4)theregulatoryandfinancialreportingrequirements.

Mistakesindesignandapplicationoftheregulatoryrequirementscanresultinsubstantialpenaltiesforboththeemployerandtheemployees/retirees.Whilemanagementhastheprimaryresponsibilityforplandesignandregulatorycompliance,thesetasksaregenerallyaccomplishedwiththesupportofamultidisciplinaryteamcomprisinghumanresourceconsultants,attorneys,taxprofessionals,actuaries,andaccountants.

Benefitsareoftenofferedandprovidedpursuanttoawrittenplan,althoughsometimestheyareprovidedwithoutsuchaplan.Theaccountingliteratureintroducedtheconceptofthesubstantive plan.

Sometimesbenefitsareprovidedonaone-timebasisoutsideofaplan—forexample,one-timeterminationbenefitsprovidedwhenemployeesareinvoluntarilyterminatedorspecialtermination benefitsofferedinconnectionwithworkforcereductionstoinduceemployeestoresignorretirevoluntarily.

Types of Benefits Typically,benefitsprovidedtoemployeesafterterminationofemploymentincludepensions,severancepay,postretirementmedicalbenefits,deathbenefits,andlong-termdisabilitybenefits.Benefitsarepaidinvariousforms.Pensionsmaybepaidasannuitiesorasasinglelumpsum.Severancepaymaybealumpsumoraseriesofinstallmentsoverashortperiod.Medicalbenefitsareprovidedthroughinsuranceorbyreimbursementofexpensesastheyareincurred.Deathbenefitsarealmostalwaysprovidedthroughlifeinsurance.Disabilitybenefitsareprovidedthroughinsurance,paymentfromatrustfund,orpaymentfromtheemployer’sgeneralassets.

Foraccountingpurposes,thecostofpostretirementbenefitsisaccruedduringtheserviceperiodoftheemployee.Whilethepatternofaccrualforeachbenefittypemayvary,theliabilityforthebenefitsshouldbefullyrecognizedbytheendoftheemployeeserviceperiod.

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Types of PlansIngeneral,theaccountingrequirementsforemployersthatprovidepensions1andpostretirementbenefitsdependonwhetherbenefitsareprovidedpursuanttoaplan(writtenorsubstantive)and,ifso,whethertheplanisadefinedcontributionplanoradefinedbenefitplanandwhetheritcoverstheemployeesofasingleemployer(oragroupofaffiliatedemployers)orofanumberofunrelatedemployers.

Thefollowingsectionsprovide(1)anoverviewofthecommontypesofplansthatfallwithinthescopeofexistingaccountingliterature,includingsomerecenttrendsintheuseofthoseplans,and(2)adiscussionofthefunding2andmanagementofplanassetsforplansthatarefundedthroughcontributionstoaseparatetrustfundthatisbeyondthereachoftheemployer’screditors.

Thetablebelowsummarizesthecommontypesofbenefitplans,employerfundingrequirementsfortheseplans,thetaxeffectsofemployercontributions,thegovernmentagenciesthatregulatesuchplans,andtheprimaryaccountingliterature.

1 Throughout this publication, we use the term “pension” to refer to any plan that provides retirement income to employees.2 Funding is legally mandatory for most pension plans. The funding for nonpension postretirement benefits is optional but not uncommon.3 Refer to Appendix C for a complete list of authoritative literature and Appendix G for a U.S. GAAP accounting and disclosure compliance

checklist.4 Department of Labor.5 Internal Revenue Service.6 AICPA Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans.7 Pension Benefit Guaranty Corporation.

Type of BenefitEmployer Funding Requirements

Tax Effects of Employer Contributions Regulated by

Primary Accounting Literature3

Qualifieddefinedcontributionplans

Contractualonly;benefit=accountbalance

Deductiblewhenmade,subjecttomaximumlimits

DOL,4IRS5 Statements87,106,132(R),and158

401(k)plans Contractualonly;benefit=accountbalance

Deductiblewhenmade;nolimitsondeductionofelectivedeferrals

DOL,IRS Statements87and132(R)

403(b)plans Contractualonly;benefit=accountbalance

Onlytax-exemptentitiescansponsor403(b)plans

DOL,IRS Statements87and132(R)

Employeestockownershipplans

Debtserviceandcontractual;benefit=accountbalance


DOL,IRS SOP93-66

Qualifieddefinedbenefitpensionplans

Statutoryminimumfundingstandards


DOL,IRS,PBGC7

Statements87,132(R),and158

Nonqualifiedretirementplans—definedbenefit

Notfunded Deductiblewhendistributedtoemployee

DOL,IRS Statements87,132(R),and158

Benefits and Plans PostretirementBenefits

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Type of BenefitEmployer Funding Requirements

Tax Effects of Employer Contributions Regulated by

Primary Accounting Literature

Nonqualifiedretirementplans—individualaccount(maytaketheformofadefinedbenefitordefinedcontributionplanforregulatoryandaccountingpurposes)

Notfunded;benefit=notionalaccountbalance(definedbenefitplan);benefit=individual’saccountbalance(definedcontributionplan)

Deductiblewhendistributedtoemployee


Postretirementmedicalbenefits

Norequirements Contributionstotrustaredeductiblewhenmade,subjecttomaximumlimits;otherwisedeductiblewhendistributed


Postretirementlifeinsurancebenefits

Norequirements Contributionstotrustaredeductiblewhenmade,subjecttomaximumlimits;otherwisedeductibleaspremiumsarepaid


Disabilitybenefits(notthroughqualifiedpostretirementplans)

Norequirements Contributionstotrustaredeductiblewhenmade,subjecttomaximumlimits;otherwisedeductiblewhendistributed

DOL,IRS Statement1128

Severancebenefits Norequirements Contributionstotrustaredeductiblewhenmade,subjecttomaximumlimits;otherwisedeductiblewhendistributed


8 See Q&A 2-1 in Appendix B for additional discussion about the applicability of Statement 158 to postemployment benefit plans that measure accumulating benefits by analogizing to Statement 87 or 106.

Recent TrendsEmployersarecontinuingtostruggletofindtherightbalanceofcompensationandbenefitsfortoday’sworkforce.Asaresult,thebenefitandplantypesarechanging.Currently,accordingtotheEmployeeBenefitsSecurityAdministration(EBSA)oftheDOL,150millionAmericansarecoveredby730,000privateretirementplansand6millionprivatehealthandwelfareplans.

Overthepast10to15years,thenumberofdefined benefit pension planshasdeclinedasaresultofterminationsandplanconversions,andmanydefinedbenefitplanshavebeenfrozen.Moreandmoreemployersareofferingplansthatshifttherisksofretirementincometotheiremployees,asdemonstratedinfigures1and2,andfewerandfeweremployersareprovidingpostretirementhealthcarebenefitsto


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retirees.Nevertheless,asdemonstratedinfigures2and3,definedbenefitplansarestillofferedinlargenumbers,particularlyinlargecompanies.

ThePBGCreportsthatitinsuresnearly29,000single-employerdefinedbenefitpensionplansandthatthenumberofworkerscoveredbytheseplanshasdeclinedbyonly200,000inthepastyear,from34.2millionto34million.

TheFASBacknowledgedthedeclineintheuseofdefinedbenefitplansinparagraphB13ofStatement158,butstated:

Althoughthetrendofsponsoringdefinedbenefitpostretirementplans,particularlydefinedbenefitpensionplans,hasdeclinedinrecentyears,theBoarddecidedtoaddresstheperceiveddeficienciesintheaccountingbecauseofthelong-termnatureandmagnitudeofexistingarrangements.

Figure 1. Participation in retirement benefits by type of plan, all private industry, 1992–93, 1996–97, 2000, and 2005.

Source: Costo,StephanieL.“TrendsinRetirementPlanCoverageOvertheLastDecade,“MonthlyLaborReviewFebruary2006,p.59.http://www.bls.gov/opub/mlr/2006/02/art5full.pdf[April27,2007].

60

50

40

30

20

10

0

Perc

ent

1992-93 1996-97 2000 2005

All Retirement Defined Contribution Defined Benefit


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Figure 2. PBGC-insured plans single-employer program.

Fewer Than 100 Participants 100 – 999 Participants 1,000 – 4,000 Participants 5,000 or More Participants

Source:PensionBenefitGuarantyCorporation.“RecentTrendsinDefinedBenefitPensionPlans,“PensionInsuranceDataBook:2005,p.8.http://www.pbgc.gov/docs/2005databook.pdf[April27,2007].

120,000

110,000

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005


Figure 3. Percent of establishments offering retirement and healthcare benefits, by size of establishment, private industry, March 2006.

Source:U.S.DepartmentofLabor,U.S.BureauofLaborStatistics.NationalCompensationSurvey:EmployeeBenefitsinPrivateIndustryintheUnitedStates,August2006.http://www.bls.gov/ncs/ebs/sp/ebsm0004.pdf[April27,2007].

Benefit

All retirement plans

Defined benefit plans

Defined contribution plans

Healthcare plans

0 10 20 30 40 50 60 70 80 90 100

1–99 employees 100+ employees

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Defined Contribution Pension PlansForstatutorypurposes,definedcontributionplans(alsoknown,moredescriptively,as“individualaccountplans”)maintainaseparateaccountforeachparticipant,withbenefitsbasedsolelyonemployerandemployeecontributions,earnings,forfeitures,andotheramountsallocabletoeachaccount.TheEmployeeRetirementIncomeSecurityAct(ERISA)(discussedingreaterdetailonpages17–18)andtheInternalRevenueCode(IRC)distinguishbetweenseveraltypesofdefinedcontributionplans,butthesedistinctionshavetendedtogrowlesssubstantiveandmoreformalisticovertheyears.Althoughtheaccountingliteraturegenerallydoesnotobservethesedistinctions,awarenessofthemisusefulinunderstandingtaxandregulatoryissues.Thefollowingdiscussioncoversthemostimportantplantypes:

Profit-sharingplans.Undercurrentlaw,aprofit-sharingplanisanydefinedcontributionplanthatisdesignatedassuchintheplandocument.Employercontributions

Foraccountingpurposes,theexistenceofindividual

accountsisconsideredfundamentaltodetermining

whetheraplanisadefinedcontributionplan.Thispoint

wasrecentlyreemphasizedbyJosephUcuzogluinanSEC

staffspeechatthe2006AICPANationalConferenceon

CurrentSECandPCAOBDevelopments:“Statements87

and106areclearthataplanshallbeconsideredadefined

contributionplanonlyifseveralcriteriaaresatisfied,one

ofwhichistheexistenceofanindividualaccountforeach

participant.Anyplanthatdoesnotmeetthedefinitionof

adefinedcontributionplanisconsideredadefinedbenefit

plan.”[Footnotesomitted]

Inaddition,theplanmusthavetermsthatspecifyhow

contributionstotheindividuals’accountsaretobe

determined,ratherthantheamountofpensionbenefits

theindividualsaretoreceive.Theexpenserecordedfor

theperiodisthecontributionrequiredforthatperiod.In

reviewingtheattributesofthedefinedcontributionplans

discussedinthissection,notethat,notwithstandingthe

variationsincontributionsandthemanagementand

distributionofplanassets,ineachcasethereisanindividual

accountandtheemployer’scontributionisdeterminable.


areusuallydiscretionary,althoughsomeplanscontainmandatorycontributionformulas.Howevercontributionsaredetermined,theplanmustcontainaformulaforallocatingthemamongparticipants’accounts.Fortheplantoqualifyforfavorabletaxtreatment,itsallocationformulamustnot“discriminate”infavorofhighlycompensatedemployeesandmustsatisfycertainothercriteria.Planassetsareheldintrustor,lessfrequently,underaninsurance contract.Investmentdecisionsmaybemadebytheemployer,aninvestmentmanager,orindividualparticipants.Aparticipant’sbenefit,typicallydistributedasalumpsumuponseparationfromservice,consistsofthebalanceofhisorheraccount.Aprofit-sharingplanmayincludeasection401(k)cash-or-deferredarrangement,asdescribedbelow.

Section401(k)plans.Profit-sharingorstockbonusplansthatincludeacash-or-deferredarrangementarecommonlyknownas“401(k)plans”afterthesectionoftheIRCthatgovernsthem.Thebenefitofsection401(k)isthatemployeecontributionsareexcludedfromtaxableincome(subjecttoanumberoflimitations).Employeecontributionstoothertypesofplansmustbeafter-tax.Arecentinnovation(introducedin2006)isthe“Roth-401(k)”:employeecontributionsareafter-tax,butdistributionsofcontributionsandearningsaretax-free.Employersfrequentlymakematchingcontributionsequaltoapercentageofemployees’contributions.Participantsareoftenallowedtoborrowfromtheiraccountsortoreceivedistributionsonaccountofhardshipwhilestillinactiveservice.

Moneypurchasepensionplans.Amoneypurchasepensionplan,likeaprofit-sharingplan,mustbeidentifiedassuchintheplandocument.However,inamoneypurchasepensionplan,contributionsarefixedbyaformula(usuallyapercentageofeachparticipant’scompensation)ratherthandiscretionary.Failuretomakerequiredcontributionssubjectstheemployertoexcisetaxes.Moneypurchaseplansmustcomplywithanumberofdistributionrequirementsthatotherwiseapplyonlytodefinedbenefitplans.

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ExceptforasmallnumberofgrandfatheredplansthatpredateERISA,suchplansmaynotincludecash-or-deferredarrangements,althoughafter-taxemployeecontributionsareallowed.Inmanyotherrespects,theyfollowdefinedbenefitplanstatutoryrequirements.Before2002,thedeductionlimitsformoneypurchaseplanswerehigherthanthoseforprofit-sharingplans,whichwastheonlymotiveforestablishingthem.Becausethatdistinctionhasbeenremoved,thistypeofplanmaybecomeobsolete.

Employeestockownershipplans.Anemployeestockownershipplan(ESOP)9operatessimilarlytoaprofit-sharingplanbutmustinvestprimarilyinstockofthesponsoringemployerorrelatedcorporations.ESOPsarecommonlyusedasacorporatefinancingvehicle,sincetheyareallowedtoborrowfundstopurchaseemployerstock.ESOPsaretechnicallyatypeof“stockbonus”plan(aplanthatmakesdistributionsintheformofemployerstock).StockbonusplansotherthanESOPsarerarelyencountered.

Inalldefinedcontributionplans,theemployer’ssoleobligationistomakeanycontributionsrequiredbytheplan.Therisksandrewardsofinvestmentperformancearebornesolelybytheparticipants.Manycommentatorshaveobservedthat,whenofferedtheopportunitytodirecttheinvestmentoftheiraccounts,individualparticipantshaveapropensityforless-than-optimalinvestmentdecisions,tendingtoholdlargeconcentrationsofemployerstockandtoinvestthebalanceoftheirfundsultraconservatively.Inresponse,thePensionProtectionActof2006(PPA)mademodesteffortstoencouragediversificationandpromoteinvestmenteducation.

Defined Benefit PlansStatutoryandaccountingguidanceprovidesthatanyplanthatisnotadefinedcontributionplanshouldbeconsideredadefinedbenefitplan.Definedbenefitplansareplansthatbasebenefitsonfactorsotherthancontributionsandinvestmentperformance.Theseplansmayprovidepension benefits orotherpostretirementbenefits.

Defined Benefit Pension PlansInadditiontothemorecommon“traditional”plans,definedbenefitpensionplansincludehybridplans,suchas“cashbalance”plans10and“pensionequity”plans.UnderStatement87,theseplansareaccountedforasdefinedbenefitplans.

Definedbenefitplansarefundedbyemployer(and,inafewplans,employee)contributionstoatrustfundorinsurancecontract.TheamountthattheemployermustcontributeisdictatedbyERISA’sminimumfundingstandards.Failuretomakerequiredcontributionssubjectstheemployertoasubstantialexcisetaxliability.Therisk/rewardofinvestmentperformancelieswiththeemployer,sincethebenefitstheemployeereceivesareunrelatedtoinvestmentperformance.

Mostdefinedbenefitplanscoveronlyemployeesofasingleemployerandmembersofthesamecontrolledgroupoftradesandbusinesses,butafewprovidebenefitstoemployeesofunrelatedemployers.ForERISAandotherregulatorypurposes,definedbenefitplansaresubdividedintomultiemployerandmultiple-employer plans,thedistinctionbeingthatmultiemployerplansareestablishedpursuanttocollectivebargaining.(Thatdistinctionhasnosignificanceforaccountingpurposes.)

9 ESOPs are accounted for differently than other defined contribution plans. They are subject to the requirements of AICPA Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans, which is not covered in this publication.


10 EITF Issue 03-4 specifically addresses cash balance plans. See Appendix C for more information about this EITF Issue.

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Multiple-employerplansgenerallyfunctionsimilarlytosingle-employer plansandaresubjecttovirtuallythesamelegalandaccountingrules.Thetreatmentofmultiemployerplansdiffersconsiderably,butthedifferenceswillnotbediscussedindetailhere.

Becausebenefitsarenotdirectlydependentonplanassets,adefinedbenefitplanmayterminatewithoutsufficientfundstosatisfyallitsbenefitliabilities.Inthatcase,agovernment-ownedinsurancecompany,thePBGC,maystepintopayalloraportionoftheunfundedbenefits.ThePBGCguaranteescovernongovernmental,nonchurchdefinedbenefitplans,withanumberofexceptions,suchasplansofsmallprofessionalservicesfirms.Theinsuranceprogramisdiscussedingreaterdetailonpages19–20.

ThePBGCmaintainsaseparateinsuranceprogramformultiemployerplans,underwhichitlendsmoneytoinsolventplansratherthanassumingbenefitliabilitiesafterplan termination.

A“traditional”definedbenefitplanprovidesabenefitatretirementcomputedbyreferencetosuchfactorsaslengthofservice,compensation(averagedovertheparticipant’sentirecareerorashorterperiod,usuallythethreetofiveyearsprecedingretirement),andinsomecases,anticipatedsocialsecuritybenefits.Thevalueofbenefitliabilities,asmeasuredforregulatorypurposes,andconsequentlytheemployer’scontributionobligation,issensitivetointerestratesandmaybevolatile.ThisvolatilitymayincreaseafterthereformsenactedbythePPAtakeeffectin2008.

Certaindefinedbenefitplans(e.g.,final-average-payplans)concentratethevalueofbenefitsinthefinalfewyearsofemployment.Thischaracteristicprovidesanincentivetoremainwithasingleemployeruntilretirement.Participatinginaseriesofplans,eveniftheyareidentical,typicallyreducesone’slifetimeaggregatebenefit.

Acashbalanceplanisatypeofdefinedbenefitplanthatbasesbenefitsonnotionalaccounts,whichinturnarebasedonservice,age,andcompensation.Eachyear,accountsareincreasedbya“servicecredit”(almostalwaysapercentageofcompensation,oftenhigherforolderorlonger-serviceparticipants)plus“interestcredits”ontheexisting“accountbalance.”Atretirement,thebalanceisconvertedintoanactuariallyequivalentannuityorpaidoutasalumpsum.

Employers’accountingforparticipationinamultiemployer

planissimilartothatforadefinedcontributionplan.That

is,theexpensefortheperiodisthecontributionrequired

forthatperiod.Employersthatparticipateinmultiple-

employerplansfollowaccountingrequirementsthatare

virtuallythesameasthosethatapplytosingle-employer

definedbenefitplans.Therehavebeennochangesinthe

accountingrequirementsformultiemployerplans.Recent

changestoregulatoryrequirementsformultiemployer

plansarecoveredinDeloitteTaxLLP’spublication,

“SecuringRetirement—AnOverviewofthePension

ProtectionActof2006.”Accountingchangesdescribedin

thispublicationforsingle-employerplanswouldapplyto

multiple-employerplansaswell.


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Other Types of Defined Benefit PlansFromanaccountingperspective,definedbenefitplansarenotlimitedtopensionplans;theyalsoincludeotherpostretirementbenefits,suchaspostretirementhealthcare.Someplansarepay-relatedandbenefitsarebasedonfinal payoronacareer average.Forexample,theamountofterminationbenefitsisoftentiedtoyearsofserviceandlevelofcompensation.Otherbenefitsarenotpay-related(e.g.,mostpostretirementhealthcareplans);thatis,oncevested,thebenefitsarethesameregardlessofyearsofserviceorcompensationlevel.Fordefinedbenefitplans,allrisksandrewardsresidewiththeemployer,althoughanemployermayestablishacapthatlimitsthelevelofrisk.

ThePPAaddressedanumberoflegalcontroversiesthathadhinderedtheadoptionofcashbalanceplans.Manyobserversexpectcashbalanceplanstobecomemorepopular,sincetheyretainmanyoftheadvantagesofthedefinedbenefitstructurebuthavelesscontributionvolatilitythantraditionaldesigns.Theyarealsogenerallyregardedasmoreattractivetoemployeeswhodonotexpecttoworkforoneemployerthroughouttheircareers.

Apensionequityplandefinestheparticipant’sbenefitasamultipleofaveragecompensationoveraperiodofyears(typicallythreetofive)beforeretirement.Theapplicablemultipledependsonlengthofservice.Often,lateryearsofserviceareassociatedwithhighermultiplesthanearlierones.Likeacashbalanceplan,apensionequityplanexplicitlydefinestheemployer’sliability,thoughitslinktoparticipants’compensationintroducesanelementofvolatility.

Pensionequityplanshavereceivedlessattentionthancashbalanceplans.Theirprincipaladvantageovercashbalanceplansisthattheymaintainamorepredictablerelationshipbetweenbenefitlevelsandpre-retirementcompensation.However,somemajorcompanies,suchasIBM,haveexperimentedwithandthenabandonedtheconcept.

History of Hybrid Plans

Cashbalanceandotherhybridplansweredeveloped

inthe1980sandenjoyedaninitialsurgeofpopularity

thatwasbroughttoanabrupthaltbylitigation.The

mostsignificantcontroversywasthatatraditional

plan“backloads”thevalueofbenefitsintothelater

yearsofparticipation,whileaccrualisspreadmore

evenlyinhybridplans.Plaintiffscontendedthatthe

“traditional”patternofaccrualwaslegallymandatory

undertheagediscriminationlaws.Thatargument

prevailedintwoearlycases,oneofwhich,involving

IBM’spensionplan,receivedagreatdealofpublicity.

Thatdecisionwas,however,reversedbytheSeventh

CircuitCourtofAppeals.Themajorityjudicialview

isthathybridplansdonotdiscriminateonaccountof

ageaslongasthevalueofbenefitscreditedtoolder

participantsisnolessthanthatforotherwiseidentical

youngerparticipants.ThePPAexplicitlyadoptedthat

principle,resolvingthequestionforthefuture.

ThePPAdealtwithtwootherhybridplancontroversies

byenactingrulesgoverningtheconversionof

traditionalplansintohybridplansandthecalculation

oflumpsumdistributionsfromcashbalanceplans.

Italsorequiredfastervestingofbenefits(noless

favorablethanfullvestingafterthreeyearsofservice),

clarifiedthedeterminationofbenefitsafterplan

termination,andprohibitedcashbalanceplansfrom

creditinginterestathigherthana“reasonable”rate,

asdeterminedbytheIRS.


12 Deloitte

Key Points • Plans that provide postretirement benefits can be subdivided in two different ways: defined benefit

versus defined contribution and pension benefits versus other postretirement benefits. Both distinctions are important for tax, regulatory, and accounting purposes.

• Defined contribution plans have separate individual accounts for participants, and benefits are based solely on employer and employee contributions, earnings, forfeiture, and other amounts allocable to each account. All other plans are defined benefit plans.

• Employer obligations to make contributions to defined contribution plans are based on the terms of the plan. There are no legally mandated minimum funding requirements. Contributions are deductible when made, subject to maximum limitations.

• Employers that maintain defined benefit pension plans must make contributions in accordance with minimum funding standards. Contributions are deductible when made, subject to maximum limitations.

• Benefits provided under qualified defined benefit pension plans are generally insured, subject to a number of limitations, by the PBGC.


Deloitte 13

Funding/Management of Plan Assets

Thefundingofpensionandotherpostretirementbenefitshasbeenthefocusofmuchmediaattentioninrecentyears,particularlythesignificantdeficitofthePBGCandtheabilityofemployerstomakegoodontheirpensionandotherpostretirementobligations.Anumberofregulationshavealsobeenenacted—mostrecently,thePPA,whichstrengthenstherequirementsforfundingandmanagementofpensionplans.

Fromanaccountingperspective,considerableefforthasbeenmadeoverthepast10yearstoincreasethetransparencyofreportingrelatedtofundingofsingle-employerdefinedbenefitplans.Forexample,theSECstaffhaspushedformoretransparentdisclosureinManagement’sDiscussionandAnalysis(MD&A),andStatement132(R)resultedinincreaseddisclosurefordefinedbenefitpensionandotherpostretirementplansregardingthetypesofplanassetsheld,investmentpoliciesandstrategies,andexpectedcontributionsandbenefitpayments(seeAppendixesEandFfordetailedguidance).

Now,withincreasedresponsibilitytoensureappropriatefundingofpensionplansandwithbalancesheetreportingofthefundedstatusofdefinedbenefitpensionandotherpostretirementbenefitobligationsrequiredbyStatement158,itismoreimportantthaneverthatmanagementunderstandhowdefinedbenefitplansarefundedandmanagedandtheregulationsthatgovernthefundingandmanagementofplanassets.

Inaddition,giventhegrowingsignificanceofdefinedcontributionplans,itisimportanttobecognizantoftherulesgoverningthefundingofthoseplansaswell.Althoughthemostrecentlyissuedregulationsandaccountingrequirementsfocusprimarilyonsingle-employerdefinedbenefitplans,therehavealsobeenchangestoregulationsgoverningdefinedcontributionplans.Accordingly,thefundingandmanagementofbothtypesofplansarediscussedbelow.

Ingeneral,theplansthatarefundedmustbefundedbylaw,namely,pensionplans.Therefore,thediscussionfocusesprimarilyonthefundingandmanagementofdefinedcontributionplansanddefinedbenefitplansthatprovidepensionbenefits.

Defined Contribution PlansDefined contribution pension plansarenotsubjecttogovernment-imposedminimumfundingrequirements,althoughthetermsoftheplanmaycommittheemployertocontributeataprescribedlevel.Thereareseverallimitationsonemployerandemployeecontributions:

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Allocationstoparticipants’accountsforanyyeararelimitedtothelesserof100percentofcompensationoranindexedceiling($44,000in2006,$45,000in2007).“Catch-up”401(k)contributions(availabletoindividualsaged50andolder)andearningsonassetsdonotcountagainstthislimit.Aviolation,unlesscorrectedinaccordancewithIRSprocedures,resultsindisqualificationoftheplan,withadversetaxconsequencesforparticipantsandtheemployer.

Deductibleemployercontributionsarelimitedto25percentoftheaggregatecompensationofplanparticipants.Contributionstodefinedbenefitplanscurrentlyreducethislimit.UnderthePPA,contributionstoplansinsuredbythePBGCwillnothaveanegativeimpact,beginningin2008.Nondeductiblecontributionsaresubjecttoa10percentexcisetax.Theymaybecarriedoveranddeductedinlateryears.Thereisnolimitationonthedeductionofemployees’401(k)contributionsorcertaincontributionstoESOPs.Contributionsaregenerallydeductibleintheemployer’staxyearinwhichtheyaremade,onacashratherthananaccrualbasis.Theymay,however,bedeductedontheprecedingyear’sreturniftheyaremadeonaccountofthatyearandnolaterthanthetaxreturnduedate,includingextensions.

Employees’pre-taxandRoth401(k)contributionsarelimitedtothelesserof100percentofcompensationoranindexedceiling($15,000in2006,$15,500in2007).Inaddition,thoseaged50andoldermaymakecatch-upcontributionsofupto$5,000in2006and2007(indexedinlateryears).Employeecontributionsotherthancatch-upcontributionscountagainstthelimitonallocationsdescribedinthefirstbulletabove.

Exceptinafewunusualcircumstances,allplanassetsmustbeallocatedtoparticipants’accounts.Assetscannotbeheld“insuspense,”awaitingallocationinlateryears.OneexceptionisinaleveragedESOP.StockpurchasedwiththeproceedsofanESOPloanisinitiallyheldinsuspenseandallocatedastheloanisrepaid.

Contributionsmaybemadeincashorproperty.Theymustbeheldintrustorunderaninsurancecontract.Thetrusteemaybeaninstitutionoracommitteeofindividuals(almostalwaysofficersoftheemployer).Planassetsarenotsubjecttotheclaimsofcreditorsoftheemployer.Participants’accountsarealsobroadly,thoughnotabsolutely,protectedagainsttheclaimsoftheirowncreditors.Manyplans,particularlysection401(k)plans,allowparticipantstodirecttheinvestmentoftheiraccounts,usuallyofferingchoicesfromamenuofmutualfunds.Othercommoninvestmentoptionsareemployerstockandinterestsininsurance-company-guaranteedincomecontracts.TheDOLhaspromulgatedrulesforparticipantdirection.Theiruseisnotcompulsory,thoughadherencetotheDOLstandardsmayreducethelikelihoodoftheemployer’sexposuretolawsuitsbyparticipantswhoseinvestmentdecisionsturnoutbadly.

PlanassetsmustbeinvestedinaccordancewithERISA’sfiduciarystandardsandprohibited-transactionrules.Mostinvestmentsareallowed,ifmadeprudently,butthereareafewexceptions.Forexample,plansmaynotacquiredebtsecuritiesoftheemployerthatarenotwidelyheldbythepublic,andparticipant-directedaccountsmaynotinvestin“collectibles”(e.g.,preciousmetals,mostcoins,alcoholicbeverages,artwork).Someinvestmentsmaygiverisetoprohibitedtransactions.Forexample,aplanmaynot,withverylimitedexceptions,holdrealpropertythatisleasedtotheemployermaintainingtheplanortoanotherpartyininterest.

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•

•

Funding/Management of Plan Assets PostretirementBenefits

Deloitte 15

Single-Employer Defined Benefit Pension PlansDefinedbenefitpensionplansmustcomplywithminimumfundingstandardsprescribedbyERISAandtheIRC.FailuretomakerequiredminimumcontributionssubjectstheemployertoexcisetaxesandcanleadtoenforcementactionbytheDOL.ThePPAsubstantiallyrevisedtheminimumfundingstandards,effectivein2008.ThePPAstandards,unliketheonestheyreplace,areintendedtorapidlybringplansuptofullfundingofbenefitliabilities.ThePPAeliminatedmanyrulesthatletbenefitincreasesortheeffectsofadverseexperiencebeamortizedoverlongperiods.Theeffectwillbetomakecontributionrequirementsmorevolatile,particularlyfortraditionaldefinedbenefitplans.Volatilitywillbesomewhatlessofanissueforhybrid(cashbalanceandpensionequity)plans.

Thecalculationofrequiredminimumcontributionsrequiresavaluationoftheplan’sassetsandliabilitiesbyanenrolledactuary.Undercurrentlaw,thefundingmethodandassumptionsaredeterminedbycorporatemanagementinconsultationwiththeplan’sactuary.ThePPAgreatlylimitsdiscretionintheseareas,startingwithplanyearsbeginningin2008,althoughlimiteddiscretionisstillallowed.

Employersmaycontributemorethantheminimumrequiredcontributionforaparticularyear.ThelawimposesmaximumdeductionlimitsthatweremarkedlyliberalizedbythePPA.Thetimingofdeductionsisthesameasthatfordefinedcontributionplans.

Managementgenerallyestablishespoliciesfortheinvestmentofplanassetsandselectstheplan’sinvestmentmanagers.Assetmanagementmaybehandledin-houseorturnedovertoabank,insurancecompany,registeredinvestmentcompany,orregisteredinvestmentadviser.Theplan’strusteemaymanageassetsbutmoreoftenisa“directedtrustee”withnoresponsibilityexcepttocarryoutinstructionsgivenbyauthorizedparties.Day-to-dayplanoperationsarenormallyhandledbytheemployer’shumanresourcesdepartmentorthroughoutsourcingtoathird-partyplanadministrator.

Likedefinedcontributionplans,definedbenefitplansmustholdtheirassetsintrustorunderaninsurancecontract.Theinvestmentofdefinedbenefitplanassetsissubjecttomorestringentrestrictionsthanthosethatapplytodefinedcontributionplans.Mostsignificantly,employersecuritiesmaynotexceed10percentofplanassets,andgenerallytheonlyemployersecuritiesthattheplanmayhold(“qualifyingemployersecurities”)arepubliclytradedstockanddebt.Ingeneral,allcontributionstoadefinedbenefitplanmustconsistofcashorqualifyingemployersecurities.Contributionsofothertypesofpropertyarepermittedonlyinrarecircumstances.

Becausebenefitaccrualinadefinedbenefitplanisnotrelatedtothevalueofplanassets,aplanmayterminatewithmoreorlessmoneythanisneededtosatisfyallbenefitliabilities.ThePBGCmakesupsomeorallofthedeficitinplansthatitinsures.Inuninsuredplans,benefitsmustbecutbackonterminationtoequaltheavailablefunds.Anysurplusremainingafterthesatisfactionofallbenefitliabilitiesmayreverttotheemployer,iftheplansoprovides,butissubjecttoordinaryincometax,plusanexcisetaxthatmaybeashighas50percentoftheamountrecovered.


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Theprecedingdiscussiondoesnotapplytoplansthatcoveronlyaselectgroupofmanagementorhighlycompensatedemployees.Fundingofthoseplansisnotrequiredandleadstoadversetaxconsequences.Theemployermay,however,contributetoatrustthatissubjecttotheclaimsofitscreditors(a“rabbitrust”).Rabbitrustsarenottreatedas“funded”forERISAorIRCpurposes.Recentlegislationimposeslimitationsonusingrabbitruststoprovidedeferredcompensation.First,thetrustmustbedomiciledintheUnitedStatesorintheforeignjurisdictioninwhichthedeferredcompensationisearned.Second,notransferstoarabbitrustmaybemade(1)whiletheemployermaintainsanyqualifieddefinedbenefitplanthatislessthan80percentfunded,(2)whiletheemployerisinbankruptcy,or(3)duringtheperiodbeginningsixmonthsbeforeandendingsixmonthsafterthedistressorinvoluntaryterminationofanydefinedbenefitplanintheemployer’scontrolledgroup.

Key Points

Defined Contribution Plans

• All contributions must be allocated among participants’ accounts in accordance with a predetermined formula. The amount that may be allocated to any particular account for a year is limited by section 415 of the IRC.

• Employees’ elective deferrals under 401(k) plans are subject to additional limitations.

• Employer contributions are deductible in the year made, subject to maximum limitations. No deduction limitations apply to 401(k) elective deferrals.

• All contributions must be held in trust or under an insurance contract, and must be invested in accordance with ERISA’s fiduciary standards.

• Participants may manage the assets in their own accounts to the extent permitted by the plan.

Defined Benefit Plans

• Employers must comply with minimum funding standards prescribed by ERISA and the IRC.

• The PPA revised the minimum funding standards, effective 2008.

• Plan assets must be held in a trust or in an insurance contract, and must be invested in accordance with ERISA’s fiduciary standards.

• Management sets the policies for asset management and selects investment managers.


Deloitte 17

Statutory Considerations

Regulatoryrequirementsareconsideredinplandesign,indevelopingchangestoplans,andindeterminingtheappropriateaccountingforbenefitobligationsandchangesinthoseobligations.ThefollowingdiscussionsummarizestheregulatoryrequirementsandprocessesthatunderlietheU.S.systemofbenefitregulation.

Employee Retirement Income Security ActERISAistheprimaryfederallegislationthatgovernspensionplansandwelfarebenefitplans,suchasthoseprovidingemployment-basedmedicalandhospitalizationbenefits.Itwaspassedin1974toaddresspublicconcernsthatfundsofprivatepensionplanswerebeingmismanagedandabused.Italsopreemptsstateregulationofpensionandwelfareplans,exceptforstatelawsthatregulateinsurancepoliciespurchasedtoprovidebenefits.ERISAcompletelyrevisedthelegalframeworkforemployeebenefits,whichhadpreviouslybeengovernedbystatelawand,sofarastaxconsequenceswereconcerned,theIRC.

Inbroadoutline,Title1ofERISAimposestherequirementslistedbelowonallU.S.pensionandwelfarebenefitplans.Fullyorpartiallyexemptedareplansmaintainedbygovernmentalbodies,churchplansthatdonotaffirmativelyelectERISAcoverage,unfundedplanscoveringonlyaselectgroupofmanagementorhighlycompensatedemployees,andafewother,lesssignificantcategories.

Plansmustfileannualreports(Form5500)withtheDOLanddistributeinformationtoparticipantsthroughsummaryplandescriptions,summaryannualreports,benefitstatements,etc.

Pensionplansmustsatisfyminimumrequirementsconcerningeligibilitytoparticipate;vesting;anddistributionofbenefits,includingprotectionsforparticipants’spouses.

Definedbenefitpensionplansmustbefundedinaccordancewithminimumfundingstandards.

Theassetsofallfundedpensionandwelfareplansmustbemanagedinaccordancewithprescribedfiduciarystandards,whichincludeperseprohibitionsagainstsales,exchanges,loans,andothertransactionsbetweenplansandpartiesininterest.

ERISAprovidesthelegalframeworkfortheenforcementofparticipants’rightsbyparticipantsthemselvesortheDOL.

AmendmentstoERISAoverthepast30yearshaveconsiderablyexpandeditsscopeandcomplexityinsuchareasasprotectionagainstagediscrimination,enhancedspousalrights,andmandatorycontinuation

•

•

•

•

•

18 Deloitte

ofhealthcarebenefitcoverage.Mostrecently,thePPAsignificantlychangedtheminimumfundingstandards,amongotherthings.(Seefurtherdiscussionbelow.)

Administration of ERISATheadministrationofERISAisdividedamongtheDOL,theIRS,andthePBGC.TheDOLhasprimaryjurisdictionoverreporting,disclosure,fiduciarystandards,enforcement(otherthantaxmatters),andissuesthataffectonlywelfareplans.TheIRSistheleadagencyforparticipation,vesting,distributionandfundingissues,andallmattersrelatingtoplans’taxstatusandthetaxeffectsofcontributionsanddistributions.ThePBGCadministersTitleIVofERISA,whichcoverstheinsuranceofdefinedbenefitpensionplans.

The Department of Labor TheDOL’sregulatoryfunctionsunderERISAarecarriedoutbytheEBSA,headedbyanassistantsecretaryoflabor.Asindicatedinthetableonpages4–5,theDOLregulatesdefinedcontributionanddefinedbenefitplans.TheEBSA’sprincipaldutiesinclude:

Issuingregulationsgoverningfiduciaryresponsibility,prohibitedtransactions,reportinganddisclosure,fidelitybonds,andERISArequirementsotherthanthoseforwhichtheprimaryrolehasbeenassignedtotheIRSorthePBGC.

ProcessingandreviewingForm5500annualreports(informationfromthesereportsisalsousedbytheIRSandthePBGC).

Conductingplanauditsdealingwithmatterswithinitsjurisdiction,withparticularemphasisonfiduciaryviolationsandprohibitedtransactions.

Recommendingcasestothesolicitoroflaborforenforcementaction.

Grantingindividualandclassexemptionsfromtheprohibited-transactionrules.

AdministeringtheVoluntaryFiduciaryCorrectionProgram,underwhichfiduciariesthathaveengagedinimpermissibleconductmay,inlimitedcircumstances,correcttheirviolationsandbeprotectedagainstfurtherenforcementaction.

The Internal Revenue Service TheIRSenforcesplanqualificationstandards(section401(a)oftheIRC),therulesconcerningthedeductibilityofcontributionsandthetaxtreatmentofdistributionstoparticipants,andanumberofrequirementswhoseviolationresultsintheimpositionofexcisetaxes(e.g.,minimumfundingrequirementsandprohibitedtransactionsinvolvingqualifiedplans).TheprimaryresponsibilityinthisareaisassignedtotheEmployeePlansDivision,whichispartoftheTaxExemptandGovernmentEntitiesDivision.TheOfficeofChiefCounselalsohasaunitdedicatedtoqualified-planissues.OverallpolicyiscoordinatedbytheTreasuryDepartment’sEmployeeBenefitsCounsel.

ThemostfrequentcontactthatplansponsorshavewiththeIRSisthroughthedeterminationletterprogram.Employersmayrequestdeterminationsthattheformoftheirplandocumentssatisfiesthe

•

•

•

•

•

•

Statutory Considerations PostretirementBenefits

Deloitte 19

qualificationstandards.Technically,obtainingadeterminationletterisnotmandatory,butitisessentialforensuringcompliancewithacomplexandinflexibleregulatorystructure.In2005,theIRSrevisedtheprogramsothatplansordinarilywillhaveaone-yearwindoweveryfiveyearsduringwhichtheymayobtaindeterminationsrelatingtoallplan amendmentsadoptedsincethelastdeterminationletterwasreceived.

Plansmustsatisfythequalificationstandardsinoperationaswellasform.Anyoperationaldefect,howeverminor,couldleadtoplandisqualification.Toavoidthatharshresult(soharshthatIRSagentsinthepastoftenignoredallbutthemostseveredefects),theIRShasestablishedtheEmployeePlansComplianceResolutionSystem(EPCRS).Underthisprogram,plansponsorsthatdiscoverproblemsmaycorrectthemvoluntarily,payafeetotheIRS,andavoidanymoreseveresanctions.

TheIRShasaregularprogramofplanaudits,whichwasrecentlyrevisedinanattempttofocusmoresharplyonthemostcommonandseriouscomplianceissues.Qualificationproblemsuncoveredduringanauditcangenerallybecorrected,butthefeesimposedareconsiderablyhigherthanwhentheemployerinitiatescorrectionundertheEPCRS.

The Pension Benefit Guaranty CorporationThePBGCisafederalcorporationthatwascreatedbyERISAandisgovernedbyaboardofdirectorsconsistingofthesecretariesoflabor,thetreasury,andcommerce.Itactsasaguarantorofbenefitsforqualifieddefinedbenefitpensionplans.Asofthecloseofthe2006fiscalyear,thesingle-employerprogramcovered28,800plansand34.2millionparticipants.ThemaximumpensionbenefitguaranteedbythePBGCissetbylawandadjustedyearly.Workerscoveredbyplansthatterminatein2007andwhoretireatage65areguaranteedupto$4,125amonth($49,500ayear).Theguaranteeislowerforthosewhoretireearlyorelectbenefitsinjoint-and-survivorannuityform.Itishigherforthosewhoretireafterage65.

ThePBGCisfinancedbyinsurancepremiumspaidbyinsuredplans,investmentincome,assetsfromterminatedunderfundedpensionplanstrusteedbythePBGC,andrecoveriesfromthecompaniesformerlyresponsibleforthoseplans.Premiumrevenuetotaledabout$1.5billionin2005.

PBGCinsuranceismandatoryfortax-qualifieddefinedbenefitpensionplans,withlimitedexceptions.WhenthePBGCwasestablishedin1974,thepremiumwas$1perparticipant.Today,insuredplanspayabasicflat-ratepremiumof$31perparticipantperyear,withannualinflationindexing,plusavariable-ratepremiumequalto0.9percentofunfundedvestedbenefits.ThePPAprovidesnewrulesfordeterminingvariable-ratepremiums,tobephasedbeginningin2008,thatparallelthenewmethodforvaluingbenefitsforminimumfundingpurposes.Aterminationpremiumof$1,250perparticipantperyear,payableforathree-yearperiod,appliestocertaindistressandinvoluntaryplanterminations.AtitsSeptember30year-endin2006,thePBGChadanestimateddeficitofmorethan$18billion,withanexposureto$73billioninunderfundedobligationsconsidered“reasonablypossible.”Bothfigureswereaconsiderableimprovementoverthe2005numbers:adeficitofalmost$23billionand$108billionin“reasonablypossible”exposure.


20 Deloitte

Aplanwithsufficientassetstopayallparticipants’accruedbenefitsmaybeterminatedbyitssponsorina“standardtermination.”Aftertermination,planassetsaredistributedtosatisfybenefitliabilitiesinaccordancewithrulesadministeredbythePBGC.

Aplanthatcannotsatisfyallitsbenefitliabilitiesmaybeterminatedthrough“distresstermination,”whichrequirestheconsentofeitherthePBGCorabankruptcycourt,orinvoluntarytermination,whichisinitiatedbythePBGCandapprovedbyacourt.Afteradistressorinvoluntarytermination,thePBGCbecomestrusteeoftheplan,takescontrolofallplanassets,andbecomesresponsibleforthepaymentofbenefitsandotheraspectsofplanadministration.

ThePBGCalsoadministersaninsuranceprogramformultiemployerpensionplans.UndertheMultiemployerPensionPlanAmendmentsActof1980,thePBGCensuresthatemployerscontinuetheirobligationtofundplanbenefitsanddonotwithdrawfromparticipationinabenefitplan.

The PBGC’s Role in Acquisitions and Other Corporate TransactionsThroughitsEarlyWarningProgram,thePBGCusespubliclyavailabledatatoidentifycorporatetransactionsthatmayresultintransfersofunderfundedpensionliabilitiestoweakersponsorsandthatmaythuscreategreaterrisksforthepensioninsuranceprogram.Itfrequentlyattemptstonegotiatewiththepartiesinvolvedtoobtaingreaterfundingfortheplanorotherassuranceagainstfuturelosses.TheprincipalmotivationforcooperatingisthePBGC’sauthoritytoseekinvoluntaryterminationofplanswhosecontinuationposesariskofunreasonablefutureinsurancelosses.Theextenttowhichcourtsmustdefertotheagency’sdeterminationsonthismatteriscontroversial.

Pension Protection Act of 2006 ThePPAfundamentallyaltersfundingobligationsofemployersthatmaintaindefinedbenefitpensionplans,prospectivelyclarifiestherulesforcashbalanceplans,makespermanenttherevisionsenactedundertheprovisionsoftheEconomicGrowthandTaxReliefReconciliationActof2001(EGTRRA)thatweresettoexpirein2010,strengthensdiversificationrightsandinvestmenteducationprovisionsforplanparticipants,andencouragesautomaticenrollmentin401(k)plans.

Funding Requirements for Single-Employer Defined Benefit PlansUnderthePPAminimumfundingstandards,theemployer’srequiredannualcontributionequalsthepresentvalueofbenefitsearnedbyparticipantsduringthecurrentyearplustheamountneededtoamortizeanyfundingshortfallovernolongerthansevenyears.Inthecaseofseverelyunderfunded(at-risk)plans,specialrulesincreasethefundingobligation.Theseruleswillbecomegenerallyeffectivein2008.ThePPAalsoextends—for2006and2007—thetemporaryfundingprovisionsenactedin2004.


Deloitte 21

Thedeterminationofwhetheraplanisunderfundedisbasedonacomparisonofthevalueofplanassetstoitsbenefitobligationsasofthevaluationdate(almostalwaysthefirstdayoftheplanyear).UnderthePPA,plansarerequiredtovaluebenefitobligationsusingdifferentinterestrateassumptionsdependingonwhenthebenefitisexpectedtobepaid.Inthedeterminationoftheappropriateinterestrate,benefitsaregroupedintothreesegments:thoseexpectedtobepayable(1)withinfiveyears,(2)withinmorethanfivebutlessthan20years,and(3)laterthan20yearsfromthepresent.Thesegmentratesarebasedonacorporatebondyieldcurve,intendedtoreflectcurrentinterestratesonhigh-qualitycorporatebondsaveragedovertwoyears.Alternatively,plansponsorsmayelecttouseasingleblendedinterestrate,stillbasedontheyieldcurve,forvaluingallbenefits.ThatelectionmayberevokedonlywithconsentoftheIRS.TheTreasuryDepartmentwillpublishtheinterestrateassumptionsmonthly.

Beginningin2008,thecorporatebondyieldcurvemethodwillbephasedin,withfullimplementationbeginningin2010.Duringthetransitionperiod,thenewrateswillbeblendedwiththosecalculatedunderthecurrentmethod,whichisbasedontheyieldson30-yearU.S.Treasurybonds.

Ingeneral,planassetsmustbevaluedatfairmarketvalueasofthevaluationdate.ThePPAallowsaveragingtoreducetheeffectofmarketfluctuations,butwithlessflexibilitythanexistinglawallows.ThePPAalsoreducesthelongestpermissibleaveragingperiodfromfiveyearstotwoyearsandrequiresthatthevalueliebetween90percentand110percentoffairmarketvalueonthevaluationdate.Theuseofashorteraveragingperiodandnarrowercorridorthancurrentlypermittedwillleadtogreatervolatilityinthevalueofplanassets.

Employersthatmadecontributionsinexcessoftherequiredminimumfundinginprioryearsmayhaveunusedfundingstandardaccountcreditbalancesthat,underpriorlaw,couldbeusedtooffsetcontributionsthattheywouldotherwisehavebeenrequiredtomake.Thesebalancesarepreservedunderthenewrules,buttheymaybeusedtoreduceanemployer’sminimumrequiredcontributiononlyforyearsinwhichtheratioofthevalueofplanassetstobenefitobligationsisatleast80percent.

InOctober2006,theFASBconsideredwhetherthe

passageofthePPAwarrantedadditionaldisclosure

requirementsfromanaccountingperspective.The

BoardobservedthatthePPAwasmostlikelytohavea

moresignificanteffectonpubliclyheldcompanies.As

aresult,theBoardconcludedthatnonewrequirements

werenecessarybecausecurrentdisclosurerequirements

underU.S.GAAP,togetherwiththeSEC’sdisclosure

requirements,shouldresultinfulldisclosureofanyimpact

ofthenewfundingrequirementsonfuturecashflows.


Thetimingofcontributionsisunchangedfromexistinglaw;theminimumrequiredcontributionmaybemadenolaterthaneight-and-a-halfmonthsaftertheendoftheplanyear.Iftheplanhadafundingshortfallfortheprecedingyear,theemployerisrequiredtomakequarterlycontributions.Forcalendar-yearplans,theinstallmentsaredueonApril15,July15,October15,andJanuary15ofthefollowingyear.Theduedatesforfiscal-yearplansfollowacorrespondingschedulebasedontheplanyear.

22 Deloitte

Key Points

• ERISA and the tax qualification rules of the IRC are the primary federal laws governing the establishment and administration of employee benefit plans.

• These laws cover participation, vesting, participants’ rights, funding, prohibited transactions, payment of benefits, benefit guarantees, disclosure, fiduciary responsibilities, and reporting requirements.

• Responsibility for administering and enforcing the laws is divided among the DOL, the IRS, and the

PBGC.

• The PPA provides rules for funding of defined benefit plans and makes permanent the revisions enacted under the EGTRRA that were set to expire in 2010.


Deloitte 23

Accounting

Theaccountingrulesapplicabletoemployers’obligationsforemployeebenefitscontinuetoevolve,withtwonewstandardsissuedinthepastseveralyears(Statements132(R)and158).AdditionalguidancehasbeenprovidedinEITFIssuesandFASBStaffPositions(seeAppendixCformoreinformation),including,mostrecently,FSPFAS158-1,whichamendsStatements87,88,and106toincorporatetheImplementationGuidesasappendixesoftherespectivestandards,therebyelevatingtheguidestoLevelAGAAP.1Inaddition,theSECstaffhasweighedinonanumberofissuesinspeechesattheannualAICPANationalConferenceonCurrentSECandPCAOBDevelopments.Theaboveaccountingstandardsrelyheavilyoncomplexactuarialconceptsandassumptions,which,inturn,increasesthechallengeinaccountingforpensionsandotherpostretirementbenefits.

Theguidanceonpensionsandotherpostretirementbenefitscoversavastarrayoftransactions,includingplaninitiation,amendment,settlement, curtailment,andtermination.Italsocoversplan suspensions,earlyretirements,andcontractualandspecialterminationbenefits.

Overtheyears,accountingforpostretirementbenefitshasresultedinmoretransparentreporting.Thecurrentaccountingstandardsaredesignedtoensurethat:

•Thecostofpensionandotherpostretirementbenefitsisrecognizedduringtheserviceperiodoftheemployee.

•Thebalancesheetreflectsthefundedstatusofabenefitplan—measuredasthedifferencebetweenplanassetsatfairvalueandtheobligationforbenefitsearnedtodate,includingconsiderationofestimatedfuturecompensationincreasesifbenefitsaretiedtocompensation—forexample,benefitsbasedonyearsofserviceandfinalpay.

•Theincomestatementreflectsthechangesintheobligationfortheperiod,withouttotallyabsorbingallgainsandlossesrelatedtovolatilityandotherchangesintheobligation,suchasplanamendments(OCIisusedtoabsorbthosechanges).

•Disclosuresprovidefurthertransparencyregardingtheemployer’sobligationandthefundingofthatobligationandtheaccountingforthecomponentsofthenetamountsreportedintheincomestatementandonthebalancesheet.

Theaccountingliteratureonpensionsandotherpostretirementbenefitscoversbenefitsprovidedpursuanttodefinedbenefitplansanddefinedcontributionplans.Thestandardsfordefinedcontributionplansare

1 The GAAP hierarchy is contained in AICPA Statement on Auditing Standards No. 69 (AU Section 411), The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.

24 Deloitte

discussedbrieflybelow.Theremainingdiscussionfocusesonthemorecomplextopicofsingle-employerdefinedbenefitplans,highlightingthemostrecentchangesinpensionandotherpostretirementdefinedbenefitaccountingrequiredbyStatement158.

Defined Contribution PlansTherequirementsforemployers’accountingfordefinedcontributionplansarerelativelysimple:(1)totheextentthataplan’sdefinedcontributionstoanindividual’saccountaretobemadeforperiodsinwhichthatindividualrendersservices,thenetcostfortheperiodisthecontributioncalledforinthatperiod;(2)ifaplancallsforcontributionsforperiodsafteranindividualretiresorterminates,theestimatedcostisaccruedduringtheemployee’sserviceperiod.Requireddisclosureslikewisearestraightforward.Paragraph11ofStatement132(R)states:

Anemployershalldisclosetheamountofcostrecognizedfordefinedcontributionpensionplansandforotherdefinedcontributionpostretirementbenefitplansforallperiodspresentedseparatelyfromtheamountofcostrecognizedfordefinedbenefitplans.Thedisclosuresshallincludeadescriptionofthenatureandeffectofanysignificantchangesduringtheperiodaffectingcomparability,suchasachangeintherateofemployercontributions,abusinesscombination,oradivestiture.

Seepage8forSECstaffcommentsregardingthenecessityofindividualaccountstoqualifyasadefinedcontributionplan.

Single-Employer Defined Benefit PlansIntheaccountingfortheemployer’sobligationtoprovideemployeebenefitspursuanttoadefinedbenefitplan,theunitofaccountingistheplan,andthebenefit formula,asreflectedinthetermsoftheplan,isthebasisfordeterminingtheemployer’sobligationforthebenefitsearnedandthecostincurredineachindividualperiod.Theplanmaybewrittenorunwritten(i.e.,asubstantiveplan).Thetermsofanunwrittenplanaredeterminedbyreferencetothemutualunderstandingofthearrangementbetweentheemployerandtheemployeesandretirees.

Balance Sheet Recognition and PresentationAuniquefeatureofpensionandpostretirementbenefitaccounting,recentlymodifiedbyStatement158,isthattheamountpresentedonthebalancesheetisthedifferencebetweenthebenefitobligation(projected benefit obligation(PBO)forpensionsandaccumulated postretirement benefit obligation(APBO)forotherpostretirementbenefitobligations)andthefairvalueofplanassetsusedtosatisfythatobligation.Inotherwords,theobligationandassetsarepresentednet,ratherthangrossedup.BeforeStatement158,Statements87and106alsorequiredthattheamountreportedonthebalancesheetbeeitheranetliabilityoranetasset,buttheamountofthereportednetliabilityornetassetdidnotnecessarilyreflectthefundedstatusoftheplan.Rather,itreflectedthenetamountrecordedasaccruedorprepaid.Thefundedstatusoftheplanwasdisclosedinthenotestothefinancialstatements,whichpresentedareconciliationofthefundedstatustotheamount(accruedorprepaid)reportedonthebalancesheet.

Accounting PostretirementBenefits

Deloitte 25

Statement158requiresfullrecognitionofanassetorliabilityfortheoverfundedorunderfundedstatusofbenefitplans.Thisrequirementappliestomostpubliccompanies,2asdefinedintheStatement,forfinancialstatementsforyearsendingafterDecember15,2006.Therequirementthatthefundedstatusbereportedonthebalancesheeteliminatestherequirementtodiscloseareconciliationofthefundedstatustotheamountsreportedonthebalancesheet.InStatement158,theBoardobservedthattheStatement’srequiredchangeswillmakeiteasierforusersoffinancialstatements“toassessanemployer’sfinancialpositionandabilitytosatisfypostretirementbenefitobligations.”

Whenpresentingthepensionorpostretirementassetorliabilityonthebalancesheet,employersarenotpermittedtoaggregateplanassetsandbenefitobligationsofoverfundedplanswiththeplanassetsandbenefitobligationsofunderfundedplans.Instead,(1)assetsderivedfromalloverfundedplansareaggregatedandrecognizedasanassetand(2)liabilitiesderivedfromallunderfundedplansareaggregatedandrecognizedasaliability.Inaddition,Statement158requiresthatifanentitypresentsaclassifiedbalancesheet,thecurrentandnoncurrentportionsofanypostretirementbenefitassetorliabilitybereportedseparatelyanddeterminedonaplan-by-planbasis.

Apostretirementliabilityshouldbeclassifiedasnoncurrentunlessthefairvalueoftheplan’sassetsisinsufficienttocoverthebenefitpaymentsexpectedtobemadeoverthenext12monthsor,iflonger,theoperatingcycle.Whensuchadeficitexists,acurrentliabilityequaltothecurrentexpectedbenefitpaymentsinexcessofthefairvalueoftheplan’sassetsshouldberecognized.

Example — Classification of a Postretirement Liability

Acompanywithaclassifiedbalancesheetsponsorsadefined benefit postretirement planwithafundedstatus,resultingina$200postretirementliability.Thefairvalueoftheplan’sassetsis$100,andtheplan’sexpectedbenefitpaymentsare$50overthenext12months.Thecompanyclassifiestheentire$200liabilityasanoncurrentliability,sincethefairvalueoftheplan’sassetsissufficienttocoveritsexpectedbenefitpaymentsoverthenext12months.

Assumethesamefactsasaboveexceptthatthefairvalueoftheplan’sassetsisonly$40.Thecompanyshouldrecordacurrentliabilityof$10andanoncurrentliabilityof$190.

Statement158requiresthatpostretirementassetsbepresentedasnoncurrentinaclassifiedbalancesheet.

Statement 158 Transition — Recognition ProvisionsToinitiallyrecognizeaplan’sfundedstatusonthebalancesheetrequiresrecognitioninaccumulatedothercomprehensiveincome(AOCI)ofpreviouslyunrecognizedamounts,namely(1)prior service costsandcredits,(2)gainsorlosses,and(3)transition obligations and assets(seeAppendixDforimplementationguidance).Insubsequentperiods,theseamountswillbereclassifiedfromOCIandrecognizedinnetincomeascomponentsofnet periodic benefitcostpursuanttoStatements87,88,and106.AmountsshouldberecordednetoftaxesonthebasisoftheapplicableprovisionsofFASBStatementNo.109,AccountingforIncomeTaxes,forboththeinitialrecognitionofaplan’sfundedstatusandthesubsequentreclassificationfromOCItonetperiodicbenefitcostpursuanttotherecognitionandamortizationprovisionsofStatements87,88,and106.

2 Companies with publicly traded equity securities were required to adopt the recognition provisions of Statement 158 as of the end of the fiscal year ending after December 15, 2006, with all other companies adopting as of the end of the fiscal year ending after June 15, 2007.


26 Deloitte

eliminatedtheAMLrequirementsofStatement87,OCIisnowusedtoabsorbtheamountsthathavenotyetbeenrecognizedinnetincome.GiventheimportanceofOCIinpensionandotherpostretirementbenefitaccounting,itisnotsurprisingthatmostnewdisclosurerequirementsfocusonthebalanceinOCIandontheamountsflowingintoandoutofit.AppendixEincludesasummaryoftheseandotherdisclosurerequirements.

Measurement DateStatements87and106requirethatpensionandpostretirementobligationsandplanassetsbemeasuredatleastonceayear.Statement158amendedStatements87and106torequirethatthemeasurement date(i.e.,thedateasofwhichplanassetsandobligationsaremeasured)matchtheyear-endbalancesheetdate.(Thenetcostfortheyearisalsomeasuredatleastonceayear.)ThisisasignificantchangeforemployerswhohadusedameasurementdatebeforethedateofthefinancialstatementsinaccordancewithStatements87and106.Anentitywillnolongerhavemonthstomeasurethefundedstatusofitsplan(s)bychoosingameasurementdateuptothreemonthspriortoyear-end.ThisprovisionwillbeeffectiveforallentitiesinfiscalyearsendingafterDecember15,2008.TheBoardprovidedthisextendedperiodtogivepreparersandtheirserviceproviders(i.e.,actuariesandplantrustees)sufficienttimetoimplementnecessaryreportingchanges.

Other Comprehensive Income BeforeamendmentbyStatement158,Statement87requiredthatamountsrelatedtotheadditionalminimumliability(AML)berecordednetoftaxinOCI.Although,asindicatedabove,Statement158

sheettreatmentofthefundedstatusoftheplan,theamountofnetperiodiccostrecognizedintheincomestatementisunaffectedbytheprovisionsofStatement158.Thatis,certainchangesinthevalueoftheobligationandinthevalueofplanassetsarenotimmediatelyrecognizedinnetincome.Such

Income Statement RecognitionTheamountreportedintheincomestatementisthenetofservicecost,interestcost,expectedreturnonplanassets,amortizationofthecostofplanamendments(i.e.,priorservicecosts),amortizationofthenetgainorloss,andamortizationofthetransitionobligationorloss.Unlikethebalance

Net Periodic Benefit Cost Formula

Servicecost

+ Interestcost

+/- Expectedreturnonplanassets

+/- Amortizationofpriorservicecost

+/- Amortizationofnetgainsorlosses

+/-Amortizationofanynettransitionassetorobligation

existingatthedateofinitialapplicationofStatements

87and106andremaininginAOCI

= Net periodic benefit cost


changesarenowfullyrecognizedinOCI(previouslytheywerenot),buttheycontinuetobeamortizedintonetincomeaspartofnetperiodicbenefitcost.

Not-for-Profit Organizations

Statement158’sguidancefornot-for-profitorganizationsis

similartothatforbusinessenterprisesexceptregardingthe

placementofamountsthatwouldotherwiseberecorded

inOCI(i.e.,gainsorlossesandthepriorservicecostsor

credits).Fornot-for-profitorganizations,suchamountsare

recognizedasaseparatelineitemoritemswithinchanges

inunrestrictednetassets,apartfromexpenses,andnotas

componentsofnetperiodicbenefitcost.

Deloitte 27

Statement158providestwotransitionalternativesregardingthechangeinmeasurementdateprovisions.Thefirstalternativerequiresthatanentitythatusesameasurementdateearlierthanitsyear-endperformtwoseparatemeasurementswithinafewmonthsofeachother.Asecondalternative3wasdevelopedtohelpreducethecostsassociatedwiththetransition.SeeAppendixDforfurtherimplementationguidance.

Example — Statement 158 Measurement Date Transition

InpreparingtoadoptthechangeinmeasurementdateprovisionsofStatement158,acalendar-year-endcompanythatcurrentlyusesaSeptember30measurementdatewillmeasureitsplanassetsandbenefitobligationsasofSeptember30,2007,foritsannualfinancialstatements.

Alternative1(Paragraph18TransitionGuidance)

ThecompanyperformsanothermeasurementonJanuary1,2008,todeterminethenetperiodicbenefitcostfor2008.OnJanuary1,2008,thecompanyrecognizesthenetperiodicbenefitcost4fortheperiodbetweenSeptember30,2007,andJanuary1,2008,netoftax,asaseparateadjustmenttotheopeningbalanceofretainedearnings.AnychangeinthefairvalueofplanassetsandbenefitobligationsfortheperiodbetweenSeptember30,2007,andJanuary1,2008,shouldberecognized,netoftax,asaseparateadjustmenttotheopeningbalanceofAOCIonJanuary1,2008.Notethatanygainsandlossesresultingfromasettlementorcurtailmentthatoccursinthefourthquarterof2007orlatershouldberecognizedinearningsintheperioditwasincurredandnotasanadjustmenttoretainedearnings.

Alternative2(Paragraph19TransitionGuidance)

TheSeptember30,2007,measurementisusedtodeterminethenetperiodicbenefitcostforthenext15months(i.e.,fromOctober1,2007,throughDecember31,2008).Thenetperiodicbenefitcost5shouldbeproportionatelyallocatedbetweenamountstoberecognizedasanadjustmenttoretainedearningsandnetperiodicbenefitcostfor2008.Inthisexample,three-fifteenthsofnetperiodicbenefitcostdeterminedforthe15-monthperiodshouldbeallocatedasanadjustmenttoretainedearningsandtheremainingtwelve-fifteenthsshouldberecognizedasnetperiodicbenefitcostfor2008.Thecompany’snextmeasurementdateisDecember31,2008.ThatmeasurementwouldbeusedtorecordthefundedstatusofitsplanfortheDecember31,2008,financialstatementsandtodeterminethenetperiodicbenefitcostforfiscalyear2009.Inaddition,anychangeinthefairvalueofplanassetsandbenefitobligationsfortheperiodbetweenSeptember30,2007,andDecember31,2008,isrecognizedinOCIonDecember31,2008.Notethatanygainsandlossesresultingfromasettlementorcurtailmentthatoccursinthefourthquarterof2007orlatershouldberecognizedinearningsintheperioditwasincurredandnotasanadjustmenttoretainedearnings.

Sometimesitisappropriatenottoalignmeasurementandyear-enddates.Statement158providesthat(1)ifasubsidiaryistheplansponsorandisconsolidatedusingafiscalperioddifferentfromthatofitsparent,theparentshouldmeasurethesubsidiary’spostretirementbenefitplanassetsandbenefitobligationsasofthesamedateusedtoconsolidatethesubsidiary,or(2)iftheplanissponsoredbyaninvesteethatisaccountedforusingtheequitymethodofaccountingandthefinancialstatementsoftheinvesteearenotavailableinatimelymannerfortheinvestortocurrentlyapplytheequitymethod,theinvestorshouldmeasuretheinvestee’splanassetsandbenefitobligationsasofthedateoftheinvestee’sfinancialstatementsthatwereusedtoapplytheequitymethod.

3 Under this alternative, companies may take up to 15 months before performing a second measurement upon adoption of the change in measurement date provisions of Statement 158 (e.g., a calendar-year company that has a September 30 measurement date performs a measurement on September 30, 2007, and not again until December 31, 2008).

4 The cost is exclusive of any gain or loss from a curtailment or settlement incurred in that period.5 See footnote 4.


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Example — Aligning the Measurement Date With the Balance Sheet Date

Anequitymethodinvesteeanditsinvestoreachhaveacalendaryear-end.Onthebasisofthetimingoftheavailabilityoftheequitymethodinvestee’sfinancialstatements,theinvestoraccountsforitsequitymethodinvestmentonaone-monthlag(i.e.,theinvestorusestheequitymethodinvestee’sNovember30financialstatementstorecorditsequitypickupinitsDecember31financialstatements).Underparagraph5ofStatement158,theequitymethodinvestorisrequiredtomeasuretheplanassetsandbenefitobligationsoftheinvesteeasofNovember30forpurposesoftheinvestor’sfinancialstatements.TheinvesteewouldneedtomeasureitsplanassetsandbenefitobligationsasofDecember31foritsownstand-alonefinancialstatements.

Measuring the Benefit Obligation and Attributing the CostAlthoughStatement158changedthemeasurementdaterequirements,theguidanceonhowtomeasuretheobligationandcostremainsunchanged.AstheintroductiontoStatement158indicates,theFASBintendstoaddressthebenefitobligationmeasurementissueinthesecondphaseofitsproject.ThisisoneofthemorecomplicatedaspectsofStatements87,88,and106andhasdrawnconsiderableattentionfromtheSECstaffovertheyears.Amongotherthings,thestaffhasspokenfrequentlyabouttheimportanceofsupportingtheassumptionsusedinmeasuringthebenefitobligation.InaspeechgivenonMay27,2004,ScottA.Taub,deputychiefaccountantintheOfficeoftheChiefAccountantoftheSEC,statedthefollowingregardingsupportingtheassumptionsused,specificallythediscount rateassumption:

[W]heredisclosuresdonotindicatewhatevidenceacompanyhaslookedtoindeterminingitsdiscountrate,wedogenerallyaskforsuchsupportaspartofareviewofthecompany’sfiling.Unfortunately,weareoftengivenresponsesthatmerelyrefertoratesusedbyothercompanies,ratherthanempiricalsupportforthecompany’sassumption.Insomecases,registrantshaveindicatedthattheyreliedontheiractuariestoselectarateandtheirauditorstotellthemiftheratewasunreasonable.Theseareinsufficientresponses.Nomatterwhomacompanyseeksoutforadviceinmakingassumptionslikethediscountrate,thecompanyshouldhavesupportforitsassumptionsthatgoesbeyondacomparisonwithothers.

Thefollowingparagraphssummarizetherequirementsfor,andassumptionsusedin,measuringthebenefitobligation.

Statements87and106refertovariousmeasurementsofthepensionandpostretirementobligations,includingthePBO,theaccumulated benefit obligation(ABO),andtheAPBO.Allofthesemeasuresreflecttheactuarial present valueofbenefitsattributedbytheplan’sbenefitformulatoemployeeservicerenderedbeforethedateasofwhichtheobligationisbeingmeasured.

Statements87and106alsorequiretheuseofspecificactuarialmethods,dependingonthenatureoftheplan,toattributethecosttospecificperiodsofemployeeservice.Theobjectiveofthisattributionapproachistoassignalevelamountofbenefittoeachyearofserviceforplanbenefitformulasthatdefinebenefitssimilarlyforallyearsofservice.Theattributionperiodisgenerallydefinedbytheplan(e.g.,thecredited service period).


Deloitte 29

Themeasurementofpensionandpostretirementbenefitsgenerallyrequirestheuseofassumptions.Suchassumptionsmayinclude,butarenotlimitedto,discountrates,expected long-term rates of return on plan assets,turnover,mortality,andhealth care cost trend rates.Thestandardsrequireuseof“explicitassumptions,”inwhicheachassumptionmustbea“bestestimate”onastand-alonebasis,ratherthanimplicitassumptions,whichtogetherproduceareasonableresult.Thefollowingparagraphsdiscussthefactorstoconsiderinselectingassumptions,includingthefollowing:

Responsibilitiesofthevariouspartiesinvolved.

Theuseofcomputationalshortcuts.

Criticalassumptions,includingSECstaffcommentsonvariousassumptions.

Assumptions — ResponsibilitiesManagementisultimatelyresponsibleforselectingassumptions;however,managementoftenlookstoitsactuariesorotheradvisersforassistanceindevelopingtheassumptions.Management—andauditors—mustthereforeunderstandthelevelofresponsibilitytheactuariesareacceptingfortheassumptionsselected.

Tobetterunderstandthenatureoftheresponsibilitytheactuaryassumesinitscalculations,managementandauditorsshouldconsidertheguidanceinActuarialStandardofPractice27(ASOP27),SelectionofEconomicAssumptionsforMeasuringPensionObligations,andASOP2,RecommendationsforActuarialCommunicationsRelatedtoStatementsofFinancialAccountingStandardsNos.87and88.

Reducing Complexity — Use of Computational ShortcutsToreducethecostofapplyingthestandards,theFASBdecidedtoallowtheuseof“shortcuts.”Paragraph10ofStatement87andparagraph15ofStatement106bothprovidefortheuseof“reasonableapproximations,”statingthat:

Ifestimates,averages,orcomputationalshortcutscanreducethecostofapplyingthisStatement,theiruseisappropriate,providedtheresultsarereasonablyexpectednottobemateriallydifferentfromtheresultsofadetailedapplication.

Critical AssumptionsAlthoughitisimportanttounderstandhowallassumptionsareselected,thediscountrate,theexpectedlong-termrateofreturnonplanassets,mortalitytableselection,andthehealthcarecosttrendratehavegarneredthemostattentioninrecentyears.TheSECstaffhasfocusedontheseassumptionsinspeechesandininquiriesofregistrants.

Discount RatesIngeneral,themeasurementofthepensionandpostretirementbenefitobligationissensitivetothediscountrate.Thediscountrateisintendedtorepresenttherateatwhichthebenefitobligationcouldbesettled.Theliteratureindicatesthatinselectingadiscountrate,employerslooktoeither(1)ratesimplicitincurrentpricesof annuity contractsthatcouldbeusedtosettletheobligationor(2)ratesofreturnon

•

•

•


30 Deloitte

high-qualityfixed-incomeinvestmentscurrentlyavailableandexpectedtobeavailableduringtheperiodtomaturityofthepensionbenefits.Inpractice,thepricesonannuitycontractsarerarelyused;itiscommon,however,touseamethodthatreflectstheratesavailableonhigh-qualitycorporatebonds.

Paragraph44AofStatement87(asamendedbyStatement158)6describestheapproachasfollows:

Pursuanttoparagraph44,anemployermaylooktoratesofreturnonhigh-qualityfixed-incomeinvestmentsindeterminingassumeddiscountrates.Theobjectiveofselectingassumeddiscountrates...istomeasurethesingleamountthat,ifinvestedatthemeasurementdateinaportfolioofhigh-qualitydebtinstruments,wouldprovidethenecessaryfuturecashflowstopaythepensionbenefitswhendue.Notionally,thatsingleamount,theprojectedbenefitobligation,wouldequalthecurrentmarketvalueofaportfolioofhigh-qualityzerocouponbonds[7]whosematuritydatesandamountswouldbethesameasthetimingandamountoftheexpectedfuturebenefitpayments.Becausecashinflowswouldequalcashoutflowsintimingandamount,therewouldbenoreinvestmentriskintheyieldstomaturityoftheportfolio.However,inotherthanazerocouponportfolio,suchasaportfoliooflong-termdebtinstrumentsthatpaysemiannualinterestpaymentsorwhosematuritiesdonotextendfarenoughintothefuturetomeetexpectedbenefitpayments,theassumeddiscountrates(theyieldtomaturity)needtoincorporateexpectedreinvestmentratesavailableinthefuture.Thoseratesshouldbeextrapolatedfromtheexistingyieldcurveatthemeasurementdate.Thedeterminationoftheassumeddiscountrateisseparatefromthedeterminationoftheexpectedrateofreturnonplanassetswhenevertheactualportfoliodiffersfromthehypotheticalportfolioabove.Assumeddiscountratesshouldbereevaluatedateachmeasurementdate.Ifthegenerallevelofinterestratesrisesordeclines,theassumeddiscountratesshouldchangeinasimilarmanner.

Intherecentpast,somecompanieshaveconstructedhypotheticalportfoliosusingtheapproachdescribedintheaboveparagraph;mostothercompaniesuseananalysisofvariousfactorstoestimatethediscountrate.Theanalysissupportingthediscountrateinvolves:

Developingtheexpectedstreamoffuturebenefitpaymentsunderlyingthebenefitobligation.

Developingthetheoreticalyieldcurveonzero-coupon,high-qualitycorporatebonds,orotherwiseusingayieldcurvedevelopedbyothers,asofthemeasurementdate.

Discountingthebenefitpaymentstreambyusingtheyieldcurve.

Solvingforthesinglerate—similartoaninternalrateofreturn—thatwouldresultinthesamediscountedvalueforthebenefitstream.

Asanalternative,manycompaniesconsiderbenchmarks,suchasapublishedindex(e.g.,theCitigroupPensionLiabilityIndexdiscountrate),intheiranalyses.Thisispermitted,providedthatthebenchmarkisareasonableproxyfortheplan’sspecificcircumstances.InaspeechgivenonMay27,2004,ScottA.Taub,deputychiefaccountantintheOfficeoftheChiefAccountantoftheSEC,acknowledgedthevariousapproachesusedbycompaniestosupportthediscountrate:

•

•

•

•

6 Similar guidance was also added to paragraph 31A of Statement 106 (as amended by Statement 158).7 Bonds issued without any periodic interest payments or coupon. They are sold at a discount from par value, with the amount of the discount representing the interest due on the investment. The amount of the discount is a factor of the length of time to final maturity and the prevailing level of interest rates.


Deloitte 31

Whilereferringtoapplicableindexrateswouldprovideacceptablesupport,othercompaniesmightsupporttheirrateinotherways.Forexample,byconstructingahypotheticalportfolioofhighqualityinstrumentswithmaturitiesthatmirrorthepensionobligation.Inanyevent,webelievethatsizeofpensionobligationsandthesignificanceofthediscountrateassumptiontotheircalculationindicatethatsignificantthoughtshouldbegiventotherate’sselection.

Becausethedurationofaplan’sbenefitobligationisaffectedbytheplandesignanddemographiccharacteristicsoftheplanpopulation(e.g.,averageage,averageservice,proportionofretirees),actuariesgenerallyexpectthatplanswithsimilarplandesignsanddemographicswouldusesimilardiscountrates.Whiletheremaybesituationsinwhichplanswithdissimilardesignsanddemographicsgeneratesimilardiscountrates(e.g.,arelativelyflatyieldcurveasdepictedinfigure4below),suchsituationsshouldbecarefullyevaluated.

SEC Staff Positions on Discount RatesOvertheyears,theSECstaffhasmadenumerouspubliccommentsaboutdiscountrates,someofwhichhavebeenformalizedintheliterature(e.g.,EITFTopicD-36)andsomeinspeeches.InTopicD-36,thestaffsuggeststhathigh-qualitycorporatebondswouldbethosethat“receiveoneofthetwohighestratingsgivenbyarecognizedratingsagency...(forexample,afixed-incomesecuritythatreceivesaratingofAaorhigherfromMoody’sInvestorsService,Inc.).”Thestaffalsoemphasizestheimportanceofusingratesthatreflectmarketconditionsasofthemeasurementdate.

Figure 4. Bloomberg composite Aa3 spot yields.

Spo

t R

ate

7%

6%

5%

4%

3%

2%

1%

Maturity (Years)

0 5 10 15 20 25 30

31-Dec-05 31-Dec-04


32 Deloitte

ForMD&A,8theSECrequiresthataregistrantwithmaterialdefinedbenefitplansdothefollowing:

[I]ncludecleardisclosureofhowitdeterminesitsassumeddiscountrate,eitherinthefinancialstatementfootnotesorinthecriticalaccountingpoliciessectionsofMD&A.Thatdisclosureshouldincludethespecificsourcedatausedtosupportthediscountrate.Iftheregistrantbenchmarksitsassumptionoffofpublishedlong-termbondindices,itshouldexplainhowitdeterminedthatthetimingandamountofcashoutflowsrelatedtothebondsincludedintheindicesmatchesitsestimateddefinedbenefitpayments.Iftherearedifferencesbetweenthetermsofthebondsandthetermsofthedefinedbenefitobligations(forexampleifthebondsarecallable),theregistrantshouldexplainhowitadjustsforthedifference.Increasestothebenchmarkratesshouldnotbemadeunlesstheregistranthasdetailedanalysisthatsupportsthespecificamountoftheincrease.

Discount Rate Implementation Issues — High Quality Asindicatedabove,theSECstaffhassaidthatinbuildingahypotheticalportfolio,employersshoulduseonlyfixed-incomesecuritiesthathaveanAa(orequivalent)ratingorbetter.Thisguidancedoesnotprohibittheselectiveuseofsuchsecuritiestoachievethehighestpossiblediscountrates.Infact,thestaffhashistoricallynotobjectedtotheselectionofspecificbondstooptimizethesupportablediscountrateaslongasthosesecuritiesareratedAaorbetterandarenotoutliers(e.g.,securitiesthatareabouttobedowngraded).Inaddition,companiesshouldconsiderwhetherthereissufficientcapacitytomeetthecashflowrequirementsoftheobligation.Thus,therateona$100millionhighlyrateddebtsecuritycannotbetheonlysecurityusedifthecashflowitismatchingis$200million.

Discount Rate Implementation Issues — Zero-Coupon BondsNotwithstandingtheamountofguidanceonselectingthediscountrate,therearestillchallenges.AsearlyasJanuary1994,attheAICPANationalConferenceonCurrentSECDevelopments,theSECstafffocusedononeofthesechallenges—namely,thatthereareveryfewhigh-quality,zero-couponbonds.

TheBoardanticipatedtheshortageofhigh-quality,zero-couponbonds.Paragraph186ofStatement106states,inpart:

However,inotherthanazerocouponportfolio,suchasaportfoliooflong-termdebtinstrumentsthatpaysemiannualinterestpaymentsorwhosematuritiesdonotextendfarenoughintothefuturetomeetexpectedbenefitpayments,theassumeddiscountrates(theyieldtomaturity)needtoincorporateexpectedreinvestmentratesavailableinthefuture.Thoseratesshouldbeextrapolatedfromtheexistingyieldcurveatthemeasurementdate.

The1994SECstaffspeechsuggeststhatthe“socalledbootstrapmethodismeansbywhichonecantransformyieldstomaturityofcouponinstrumentsintocounterpartyieldsofzerocouponinstruments.”Thespeechcallsonthosewithacknowledgedexpertiseintheareato“estimateandpublishayieldcurveforhighqualityzerocouponbondsthatwillremainoutstandinguntiltheirscheduledmaturities.”Thus,presumably,inusingahypotheticalportfoliotodevelopitsdiscountrateassumption,acompanycouldusethisyieldcurvetoestimateadiscountrateforcashflowsthatcannotbematchedwithexistingzero-couponbonds.Sincethattime,anumberofinstitutionshavepublishedyieldcurvesperiodically.

8 As outlined in the November 30, 2006, Current Accounting and Disclosure Issues in the Division of Corporation Finance.


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Discount Rate Implementation Issues — Yield CurvesSomecompanieshaveusedyieldcurvesindevelopingtheirestimateofadiscountrate.Itisimportanttounderstandhowsuchyieldcurveswereconstructed,including9thesizeofthefloatofthesecuritiesthatwereusedtocreatethecurve;howtheabsenceofsecuritiesmaturingatparticularpointsalongthecurveishandled;whetherany“outliers”wereusedinconstructingthecurve;howtheshapeofthecurveisdeterminedforperiodsafterthelastsecuritymatures;andhowcalladjustmentshavebeenhandled.

Changes in Approach to Determining the Discount RateIncertaincircumstances,anemployermaychangeitsapproachtoselectinganassumption.ThisispermittedbyparagraphE57ofStatement87(asamendedbyFSPFAS158-1)andistreatedasachangeinestimateratherthananaccountingchange.ParagraphE57states,inpart:

Thepurposeofparagraph44istodescribetheobjectiveofselectingassumeddiscountrates,namely,todeterminetheinterestratesinherentinthepriceatwhichthepensionbenefitscouldbeeffectivelysettled—currently.IfanemployerthatpreviouslyuseddoubleAbondratesbelievesinasubsequentyearthat,inconsiderationofitspensionplan’sparticularfactsandcircumstances,theinterestratesthatwouldbeinherentinaneffectivesettlementofthepensionbenefitsarenowmorecloselyreflectedbytheratesimplicitincurrentpricesofannuitycontracts,thenthoseratesshouldbeusedandthechangeisviewedasachangeinestimate(theestimate’sbeingthedeterminationoftheeffectivesettlementrates).Thekeyisthattheemployerisusingtheratesimplicitincurrentpricesofannuitycontractsasthebasistodeterminethebestestimateoftheeffectivesettlementrates.Thedecisiontouseaparticularmethodologyinaparticularyeardoesnotmeanthattheemployermustusethatmethodologyinsubsequentyears.Achangeinthefactsandcircumstancesmaywarranttheuseofadifferentsourcethatbetterreflectstheratesatwhichtheobligationcouldbeeffectivelysettled—currently....

Asindicatedabove,theemphasisinselectingassumeddiscountratesshouldbetheuseofthebestestimate.Changesinthemethodologyusedtodeterminethatbestestimateshouldbemadewhenfactsorcircumstanceschange(forexample,ageneraldeclineorriseininterestratesthathasnot,asyet,beenreflectedintheratesimplicitinthecurrentpricesofannuitycontracts).Ifthefactsandcircumstancesdonotchangefromyeartoyear,itwouldbeinappropriatetochangethebasisofselection,particularlyiftheintentinchangingthebasisistoavoidachangeintheassumeddiscountrates.

Expected Return on Plan AssetsAnotherassumptionthathasreceivedmuchattentionovertheyearsistheexpectedreturnonplanassets.

Paragraph30ofStatement87states:

Theexpectedreturnonplanassetsshallbedeterminedbasedontheexpectedlong-termrateofreturnonplanassetsandthemarket-relatedvalueofplanassets.Themarket-relatedvalueofplanassetsshallbeeitherfairvalueoracalculatedvaluethatrecognizeschangesinfairvalueinasystematicandrationalmannerovernotmorethanfiveyears.Differentwaysofcalculatingmarket-relatedvaluemaybeusedfordifferentclassesofassets(forexample,anemployermightusefairvalueforbondsandafive-year-moving-averagevalueforequities),butthemannerofdeterminingmarket-relatedvalueshallbeappliedconsistentlyfromyeartoyearforeachassetclass.

9 These same considerations would be important when constructing a hypothetical portfolio.


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Theuseoftheexpectedreturnonplanassetshaspermittedmanycompaniestoreportpositivereturnsonplanassetswhen,infact,therewerelossesinrecentyearsandforotheryears,thesecompaniesunderreportedassetperformance.Statement158hasaddressedthisissuefromabalancesheetperspective—thebalancesheetmustnowreflectthedifferencebetweenthebenefitobligationandtheactualfairvalueofplanassets.However,thereshouldbenochangeintheincomestatementreportingofthereturnonplanassets;thatis,netperiodiccostshouldcontinuetoreflecttheexpectedreturnonplanassets,nottheactual return on plan assets.

SEC Staff Views on Rate of ReturnInaspeechatthe2002AICPANationalConferenceonCurrentSECDevelopments,SECAssociateChiefAccountantToddHardimandiscussedtheestimatedreturnonplanassets.HeindicatedthatMD&Ashouldincludeadequatedisclosureoftheregistrant’spensionplanassetsandtheestimatedreturnonplanassets.Thestartingpointinevaluatingthereasonablenessofthereturnonpensionplanassetsisthehistoricalreturnoftheregistrant’sassetportfolio.Onthebasisoflong-termhistoricalratesofreturnondebtandequitysecurities,thestaffishighlyskepticalwhenregistrantsuseanestimatedrateofreturnonpensionplanassetsofgreaterthan9percent.Accordingly,MD&Ashouldclearlyexplainthereasonswhytheregistrantisusingsucharate.

ThatspeechalsoaddressedindetailMD&Adisclosuresforregistrantsthatuseacalculatedvalueofthereturnonpensionplanassets,emphasizingtheneedtoprovideinformationonwhenchangesinfairvalueareexpectedtobereflectedinresultsofoperations,cashflows,andpensionexpense.Otherdisclosuresshouldprovideadditionaltransparencyregardingthedirectionoffutureestimatedreturnsandtheeffectonoperationsandcashflowsandonthemethodtheregistrantusestodeterminetheexpectedreturnforeachsignificantcategoryofplanassets,alsodisclosingchangesintheallocationofplanassets.

SeeAppendixFforadditionalSECMD&Adisclosureguidanceonpensionandpostretirementbenefitobligations.

MortalityIndefinedpensionandotherpostretirementbenefitplans,becausetheemployerbearstheriskthatanemployeeorretireewilllivelongerthanexpected(andreceivesthepotentialbenefitiftheemployeeorretireediesearlierthanexpected),themortality rateisakeyassumptioninmeasuringthebenefitobligation.Themortalityrateisanestimateoftheproportionofemployee/retireedeathsthatwilloccurinaparticulargroupintheprojectedbenefitperiod,comparedwiththoselivingatthebeginningofthesameperiod.Ingeneral,publishedmortalitytablesareusedinselectinganappropriatemortalityrate,becausemostplansaretoosmalltohavecrediblemortalityexperience.Suchtablesareupdatedfromtimetotimeforchangesinmortalityrates.

SEC Staff Views on the Mortality AssumptionInanSECstaffspeechatthe2004AICPANationalConferenceonCurrentSECandPCAOBDevelopments,JaneD.Poulin,associatechiefaccountantintheSEC’sOfficeoftheChiefAccountant,observedthatthestaffsuspectedthatsomeplanvaluationsmightbebasedon20-year-oldmortalitytables,eventhoughmorerecenttablesareavailable.Shefurtherstated:


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Inadditiontousingthemostrecenttables,it’simportantthatthemortalitytablesusedinbenefitplancomputationsbereflectiveoftheemployeebasecoveredundertheplan.Sincewearemuchmoreaworldofserviceprovidersthanweusedtobewhensomeofthecommonmortalitytablesweredeveloped,selectionofamortalitytableshouldtakethisfactintoconsideration.Ifyourcompanyoperatesinaserviceindustryandyouuseamortalitytabledevelopedfromemployeedatainmanufacturingindustries,somemightarguethatthemortalitytablemaynotbereflectiveofyouremployeebase.

Health Care Cost Trend RateAsdefinedinStatement106,thehealthcarecosttrendrate(the“trendrate”)“representstheexpectedannualratesofchangeinthecostofhealthcarebenefitscurrentlyprovidedbythepostretirementbenefitplan,duetofactorsotherthanchangesinthedemographicsoftheplanparticipants,foreachyearfromthemeasurementdateuntiltheendoftheperiodinwhichbenefitsareexpectedtobepaid.”Incorporatingpastandcurrenthealthcarecosttrends,thetrendrateimplicitlyconsidersestimatesofhealthcareinflation,changesinhealthcareutilizationordeliverypatterns,technologicaladvances,andchangesinthehealthstatusofplanparticipants.

ThetrendrateistheonlyassumptionforwhichtheFASBstandardsrequireasensitivityanalysis(i.e.,disclosureoftheeffectofa1percentchangeupanddownfromtheultimaterateassumed).TheBoardconcludedthatasensitivityanalysisofthetrendrateisparticularlyrelevantbecauseofpotentiallyunsymmetricaleffectsassociatedwithincreasesversusdecreasesinthetrendrateandthatthe“trendratewouldbedifficulttoassessbecausethewayinwhichhealthcarecostassumptionsinteractwithcaps,cost-sharingprovisions,andotherfactorsintheplanprecludesreasonableestimatesoftheeffectsofthosechanges.”TheBoardalsonotedthatthegrowthrateofhealthcarecostshasbeendecreasingformanyplans;thus,thedisclosureoftheeffectsofdecreasesinthetrendratemayprovidemorerelevantinformation.

Ourmostrecentsurvey,basedondisclosuresinfinancialreportsfor2005,indicatedthatmostcompaniesassumedaninitialtrendrateof9percentto10percent,withanultimateassumedrateof5percent.10In2001,LynnTurner,thethenchiefaccountantoftheSEC,observedthathealthcarecostswererisingandthat“thestaffwouldexpectregistrantstoalsobeadjustingtheirhealthcarecostratestoreflectthesedevelopments.”Interestingly,asurveybytheKaiserFamilyFoundationandtheHealthResearchandEducationalTrust11indicatesthat,whilehealthcarecostshavebeenrising,thehealthcarecosttrendratehasbeendeclining,althoughitisstillhigherthaninflation:

Betweenspringof2005andspringof2006,premiumsforemployer-sponsoredhealthinsuranceroseby7.7%,aslowerratethanthe9.2%increasein2005and11.2%increasein2004....

Althoughtheaveragepremiumincreasefor2006is7.7%,manycoveredworkersareinfirmsthatexperiencedpremiumchangesthatweresubstantiallyaboveorbelowtheaverage:42%ofcoveredworkersworkforfirmswherepremiumsincreasedbyfivepercentorless,while13%ofcoveredworkersworkforfirmswherepremiumsincreasedbymorethan15%.Premiumsinfullyinsuredplansgrewmorequicklythanpremiumequivalentsinself-fundedplans(8.7%versus6.8%).

10 2006 Survey of Economic Assumptions — for Statement of Financial Accounting Standards No. 87 and No. 106 Purposes (Deloitte Consulting LLP).11 Employer Health Benefits 2006 Annual Survey.


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Figure 5. Cost of health insurance premiums continues rising faster than earnings, inflation, or GDP.

15%

12%

9%

6%

3%

0%

Perc

ent

incr

ease

fro

m p

rio

r ye

ar

2000 2001 2002 2003 2004 2005 2006

Health Insurance Premiums Gross Domestic Product Worker’s Earnings Overall Inflation

Source:www.allhealth.org.“HealthCareCosts,”CoveringHealthIssues,2006.http://www.allhealth.org/sourcebook2006/pdfs/chapter_8.pdf.

NOTE: GDP figure for 2006 is as of the second quarter, annually adjusted (2000 dollars).

8.2

10.9

12.9

13.9

11.2

9.2

7.7

3.7

0.8 1.62.1

3.22.6

3.9

3.1 3.3

4.0

2.63.0

2.3

3.9 3.5

2.7

3.83.5

1.6

Thevariabilityinpercentageincreasesreinforcesthepointthatassumptionsshouldbebasedontheparticularcircumstancesoftheemployer.

Other Comments on AssumptionsThedeterminationofpensionandotherpostretirementbenefitobligationsrequirestheuseofmanymoreassumptions,suchasthesalaryandwageincreaserate,theemployeeturnoverrate,retirementage,averagelengthofservice,anddisabilityrate.However,theassumptionsdiscussedabove—thediscountrate,therateofreturnonplanassets,mortality,andthehealthcarecosttrendrate—havegarneredthemostattentionovertheyears,andthereareextensivefinancialstatementdisclosureandMD&Adisclosurerequirementsforthediscountrate,rateofreturnonplanassets,andhealthcarecosttrendrate.

Becauseoftheinherentsubjectivityofassumptions,managementshould,whenselectingassumptions,focusontheappropriatenessandconsistencyoftheunderlyingapproachandtheadequacyofsupportivedocumentation.SuchdocumentationiscriticalgiventheamountofdisclosurerequiredbytheFASBstandardsandforMD&A.

2.2


2.5

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Plan Changes or Events That Affect Employer Accounting Duringthelifeofadefinedbenefitplan,theremaybeplanchangesoreventsthataffecttheemployer’saccountingforitsobligationundertheplan.Thesechangesoreventsincludethefollowing:

Planamendments.

Curtailments.

Settlements.

Employeeterminations.

Aplanamendmentisachangetothetermsoftheplanthateitherincreasesordecreasesbenefits.Theeffectofaplanamendmentisrecognizedimmediatelyinthenetobligation/assetpresentedonthebalancesheetandinOCI.Immediaterecognitioninnetperiodiccostsisnotpermitted(exceptwhentheemployerdoesnotexpecttorealizeanyfutureeconomicbenefitsfromthatretroactiveplanamendment,asoutlinedinparagraphE19ofStatement87andamendedbyStatement158);rather,thestandardsrequiredeferralandamortizationoverfutureserviceperiods(generallyexpectedtobeuntilretirementforpensionsanduntilfull eligibilityforotherpostretirementbenefits).

Aplanchangethateliminatestheaccrualofbenefitsforsomeorallofthefutureserviceofasignificantnumberofemployeesisconsideredacurtailment.Theterminationofemployees’servicesearlierthanexpected(anevent)isalsoacurtailmentifitsignificantlyreducestheexpectedyearsoffutureserviceofpresentemployees.

Asettlementoccurswhentheemployerisirrevocablyrelievedofitsobligationandhaseliminatedsignificantrisksrelatedtotheobligationandassetsusedtoeffectthesettlement.

Statement88providestwoexamples—makinglump-sumcashpaymentstoplanparticipantsandpurchasingnonparticipating annuity contractstocovervested benefits.Asettlementmightalsooccurinanacquisitionifthebuyeragreestoassumetheseller’spensionorpostretirementbenefitobligation.

Terminationofemployeesmaytriggeradditionalbenefits,suchascontractualterminationbenefits(benefitscontractuallyrequiredundertheplanwhencertaineventsoccur)orspecialterminationbenefits(benefitsofferedforashorttimeasanincentivetoemployeestoresignorretireearly).Thegainorlossarisingfromtheseeventsisrecognizedimmediatelyinincomewhenthecriteriaforrecognitionaremet.

•

•

•

•


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Thetablebelowsummarizestheeffectsofplanamendments,settlements,curtailments,andterminationbenefitsunderStatement88,asamendedbyStatement158:

Summary of Plan Changes Change or Event Recognized in Liability Recognized in Income

Planamendment(notincludinganyamendmentsthatresultincurtailments)

Whenenacted Overperiodbeginningfromdateofenactmenttoexpecteddateofretirementforpension/tofulleligibilityforotherpostretirementbenefits;immediaterecognitionprohibited(exceptwhentheemployerdoesnotexpecttorealizeanyfutureeconomicbenefitsfromthatretroactiveplanamendment)

Curtailment Whencriteriaforcurtailmenthavebeenmet12

Netgain—uponemployeeterminationortheadoptionofplansuspensionoramendment

Netloss—whenthecurtailmentisprobable(i.e.,couldbeearlierthantimingofgainrecognition)

Settlement Whencriteriaforsettlementhavebeenmet13

Whencriteriaforsettlementhavebeenmet

Contractualterminationbenefits Recognizedwhenprobablethatemployeeswillbeentitledtobenefitsandamountcanbereasonablyestimated

Whenprobablethatemployeeswillbeentitledtobenefitsandamountcanbereasonablyestimated

Specialterminationbenefits Recognizedwhenemployeesaccepttheofferandtheamountcanbereasonablyestimated

Whenemployeesaccepttheofferandtheamountcanbereasonablyestimated

SEC Staff Views on Plan ChangesTheabovetableshowsthatthetimingofrecognitionofplanchangescanvary.Statement106addressestheissueofsimultaneousplanchangesthatmightotherwiseresultinnonsimultaneousrecognitionofrelatedgainsandlosses.InanSECstaffspeechatthe2006AICPANationalConferenceonCurrentSECandPCAOBDevelopments,JosephUcuzoglucommentedonthisphenomenonasfollows:

[M]anycompaniesareenactingchangestotheirpensionandpostretirementbenefitplansinanefforttoreducetheirobligationsandmitigatetheirriskswithrespecttothesearrangements.Thestaffhasobservedthatthesebenefitplanchangesoftenconsistofaseriesofinterrelatedactionsinwhichthebenefitsofferedundercertainoftheemployer’sarrangementsarereducedoreliminated,whilethebenefitsofferedunderotherarrangementsareenhanced.Iftheliabilityforeachofthe

12 Refer to paragraphs 12–14 of Statement 88 for the curtailment criteria.13 Refer to paragraphs 9–11 of Statement 88 for the settlement criteria.


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employer’sarrangementswasreflectedinthefinancialstatementsatfairvalue,withanychangesduringtheperiodimmediatelyrecognizedinincome,theincreasesanddecreasestovariousbenefitarrangementswouldnaturallyoffsetsuchthatthenetamountreflectedintheincomestatementwouldrepresentthetrueeconomicreductionintheemployer’sbenefitobligations.Unfortunately,thedeferredrecognitionprovisionsofStatements87and106resultintherecognitionofcertainplanchangesoverafutureperiod,whilechangestocertainotherbenefitarrangementsarereflectedinincomeimmediately.[Footnotesomitted]

Inordertoappropriatelyreflecttheeconomicsubstanceofaseriesofinterrelatedbenefitplanchanges,itisimportanttoconsiderthetotalityoftheactionstaken.Asasimpleexample,acompanymayreachanagreementwithitsemployeestoforgopayingapresentlyduebonusthattheemployeeshaveearned,andinreturnwillincreasethebenefitspayableunderitspensionplanbyanequalamount.Ifoneweretoviewthetwoactionsinisolation,theeliminationofthebonusaccrualwouldbereflectedasagainintheincomestatementimmediately,whilethebenefitenhancementinthepensionplanwouldbereflectedaspriorservicecostandamortizedoverafutureperiod.Thataccountingwouldnotreflecttheunderlyingeconomicsubstanceoftheexchange.

TheFASBStaffImplementationGuidestoStatements87,88and106containseveralexamplesthatmayassistpreparersindeterminingtheappropriateaccountingforconcurrentlynegotiatedchangesinvariousbenefitplans.Consistentwiththatguidance,insomecircumstances,itmaybemostappropriatetoimmediatelyrecognizeinincomepartorallofthechangeintheobligationunderadefinedbenefitplanratherthanreflectingsuchchangeasapositiveornegativeplanamendmentthatisamortizedintoincomeoverfutureperiods.

Termination BenefitsTerminationbenefitsarecurrentlyaddressedinStatements88and106.Thefollowingtableoutlinesthetypesofterminationbenefitsthatareaddressedinthediscussionthatfollows.

Type of BenefitVoluntary or Involuntary?

Offered Pursuant to an Existing Plan? Vest or Accumulate

Applicable Literature

Specialterminationbenefits

Voluntary No,althoughthebenefitsmightbeprovidedbyamendinganexistingplan

No Statements88and106

Contractualterminationbenefits

Involuntary—triggeredbyanevent

Yes No Statements88and106

Individualdeferredcompensationarrangements

Either No,butcouldbesubjecttoindividualcontracts

Generally,yes Statement106


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Special Termination BenefitsUnderStatements88and106(whichreferstotheguidanceinStatement88),specialterminationbenefitsareterminationbenefitsthatareofferedonlyforashorttimetoinducevoluntaryterminations.Bydefinition,thesebenefitsarenotofferedunderanexistingplan(althoughtheymaybeenhancementstoexistingplans).

Statement88requiresthataliabilityandalossberecognizedwhentheemployeeacceptstheofferandtheamountofbenefitscanbereasonablyestimated.Theliabilityshouldincludetheamountofanylump-sumpaymentsplusthepresentvalueofanyexpectedfuturepayments.

Contractual Termination Benefits Contractualterminationbenefitsareterminationbenefitsthatarerequiredbythetermsofaplanandpayableonlywhenaspecifiedevent,suchasaplantclosing,occurs.

Statement88requiresthataliabilityandalossberecognizedwhenitisprobablethatthespecifiedeventthattriggerstheterminationwilloccurandtheamountofbenefitscanbereasonablyestimated.Similarlytospecialterminationbenefits,theliabilityismeasuredatthepresentvalueofanyexpectedfuturepayments.

Individual Deferred Compensation Termination Benefits Individualdeferredcompensationarrangementsprovideforbenefitsunderindividualcontractsthatarenot,whentakentogether,equivalenttoaplan.Thebenefitsmaybepensionorotherpostretirementbenefits,includingterminationbenefits.

Generally,individualdeferredcompensationcontractsareaccountedforindividuallyonanaccrualbasisinaccordancewiththetermsoftheunderlyingcontract.Ifthetermsofthecontractattributealloraportionofthebenefitstoaperiodofservicegreaterthanoneyear,thecostofthosebenefitsisaccruedoverthatperiodinasystematicandrationalmanner.Attheendoftheserviceperiod(the full eligibility dateasdefinedinStatement106),theamountaccruedshouldbeequaltothethenpresentvalueofthebenefitsexpectedtobeprovidedinexchangefortheemployee’sservicerenderedtothatdate.


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Key Points

• Statement 158, issued in September 2006, requires an employer that is a business entity for its defined benefit plans to:

° Recognize the funded status of a benefit plan — measured as the difference between plan assets at fair value and the benefit obligation — in its statement of financial position.

° Recognize as a component of OCI, net of tax, the gains or losses and prior service costs or credits that arise during the period but that are not recognized as components of net periodic benefit cost pursuant to Statement 87 or 106.

° Subsequently recognize as a component of net periodic benefit cost — pursuant to the recognition and amortization provisions of Statements 87 and 106 — amounts recognized in AOCI.

° Measure defined benefit plan assets and obligations as of the date of the employers’ fiscal year-end statement of financial position.

° Disclose, in the notes to the financial statements, additional information about certain effects on net periodic benefit cost for the next fiscal year.

• Statement 158 is the first step in a project to comprehensively reconsider Statements 87, 88, 106, and 132(R) and related guidance.

• FSP FAS 158-1, issued in February 2007, updates the illustrations contained in Appendix B of Statements 87 and 88 and Appendix C of Statement 106 to reflect the provisions of Statement 158. The FSP also amends the questions and answers contained in the Implementation Guides to Statements 87, 88, and 106 and incorporates them into those statements.

• The SEC staff has been active in various aspects of postretirement benefit accounting, including assumptions used in benefit obligation calculations. The staff’s focus has been on discount rates, the expected long-term rate of return on plan assets, selection of mortality tables, and health care cost trend rates.

• Management should focus on the adequacy of documentation of the assumptions used in benefit obligation calculations.


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Appendix A — Glossary of TermsMostofthedefinitionsinthisglossaryhavebeenreprintedfromparagraph264ofStatement87(asamendedbyparagraphC2ofStatement158whenapplicable)andparagraph518ofStatement106(asamendedbyparagraphD2ofStatement158whenapplicable).Modificationsandattributionsareindicatedinbracketsbelow.AccountingdefinitionsmaydifferfromthosefoundinERISAorotherstatutorysourcematerials.

Accumulated benefit obligation — Theactuarialpresentvalueofbenefits(whethervestedornonvested)attributedbythepensionbenefitformulatoemployeeservicerenderedbeforeaspecifieddateandbasedonemployeeserviceandcompensation(ifapplicable)priortothatdate.Theaccumulatedbenefitobligationdiffersfromtheprojectedbenefitobligationinthatitincludesnoassumptionaboutfuturecompensationlevels.Forplanswithflat-benefitornon-pay-relatedpensionbenefitformulas,theaccumulatedbenefitobligationandtheprojectedbenefitobligationarethesame.[Statement87]

Accumulated postretirement benefit obligation — Theactuarialpresentvalueofbenefitsattributedtoemployeeservicerenderedtoaparticulardate.Priortoanemployee’sfulleligibilitydate,theaccumulatedpostretirementbenefitobligationasofaparticulardateforanemployeeistheportionoftheexpectedpostretirementbenefitobligationattributedtothatemployee’sservicerenderedtothatdate;onandafterthefulleligibilitydate,theaccumulatedandexpectedpostretirementbenefitobligationsforanemployeearethesame.[Statement106]

Active plan participant — Anyactiveemployeewhohasrenderedserviceduringthecreditedserviceperiodandisexpectedtoreceivebenefits,includingbenefitstoorforanybeneficiariesandcovereddependents,underthepostretirementbenefitplan....[Statement106]

Actual return on plan assets (component of net periodic [pension or] postretirement benefit cost) —Thechangeinthefairvalueoftheplan’sassetsforaperiodincludingthedecreaseduetoexpensesincurredduringtheperiod(suchasincometaxexpenseincurredbythefund,ifapplicable),adjustedforcontributionsandbenefitpaymentsduringtheperiod.[Statement106]

Actuarial present value — Thevalue,asofaspecifieddate,ofanamountorseriesofamountspayableorreceivablethereafter,witheachamountadjustedtoreflect(a)thetimevalueofmoney(throughdiscountsforinterest)and(b)theprobabilityofpayment(forexample,bymeansofdecrementsforeventssuchasdeath,disability,orwithdrawal)betweenthespecifieddateandtheexpecteddateofpayment.[Statement106]

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Amortization — Usuallyreferstotheprocessofreducingarecognizedliabilitysystematicallybyrecognizingrevenuesorreducingarecognizedassetsystematicallybyrecognizingexpensesorcosts.Inaccountingfor[pensionor]postretirementbenefits,amortizationisalsousedtorefertothesystematicrecognitionin[netpensionor]postretirementbenefitcostoverseveralperiodsofamountspreviouslyrecognizedinothercomprehensiveincome,thatis,gainsorlosses,priorservicecostsorcredits,andanytransitionobligationorasset.[Statement106,asamended]

Annuity contract — Acontractinwhichaninsurancecompanyunconditionallyundertakesalegalobligationtoprovidespecifiedpensionbenefitstospecificindividualsinreturnforafixedconsiderationorpremium.Anannuitycontractisirrevocableandinvolvesthetransferofsignificantriskfromtheemployertotheinsurancecompany....[Statement87]

Assumptions — Estimatesoftheoccurrenceoffutureeventsaffecting[pensionor]postretirementbenefitcosts,suchas[mortality,withdrawal,disablementandretirement,changesincompensationandnationalpensionbenefits,]turnover,retirementage,dependencystatus,percapitaclaimscostsbyage,healthcarecosttrendrates,levelsofMedicareandotherhealthcareproviders’reimbursements,anddiscountratestoreflectthetimevalueofmoney.[Statement106]

Attribution — Theprocessofassigningpension[orpostretirement]benefitsorcosttoperiodsofemployeeservice.[Statement87]

Benefit formula — Thebasisfordeterminingbenefitstowhichparticipantsmaybeentitledundera[pensionor]postretirementbenefitplan.Aplan’sbenefitformulaspecifiestheyearsofservicetoberendered,agetobeattainedwhileinservice,oracombinationofboththatmustbemetforanemployeetobeeligibletoreceivebenefitsundertheplan.Aplan’sbenefitformulamayalsodefinethebeginningofthecreditedserviceperiodandthebenefitsearnedforspecificperiodsofservice.[Statement106]

Benefits — Themonetaryorin-kindbenefitsorbenefitcoveragetowhichparticipantsmaybeentitledundera[pensionor]postretirementbenefitplan....[Statement106]

Career-average-pay formula (Career-average-pay plan) — Abenefitformulathatbasesbenefitsontheemployee’scompensationovertheentireperiodofservicewiththeemployer.Acareer-average-payplanisaplanwithsuchaformula.[Statement87]

Contributory plan — Apension[orpostretirement]planunderwhichemployees[orretirees]contributepartofthecost.Insomecontributoryplans,employees[orretirees]wishingtobecoveredmustcontribute;inothercontributoryplans,employeecontributionsresultinincreasedbenefits.[Statement87]

Cost-sharing (provisions of the plan) — Theprovisionsofthepostretirementbenefitplanthatdescribehowthecostsofthecoveredbenefitsaretobesharedbetweentheemployerandtheplanparticipants.Cost-sharingprovisionsdescriberetiredandactiveplanparticipants’contributionstowardtheirpostretirementhealthcarebenefits,deductibles,coinsurance,out-of-pocketlimitationsonparticipantcosts,capsonemployercosts,andsoforth.[Statement106]

Appendix A PostretirementBenefits

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Credited service period — Employeeserviceperiodforwhichbenefitsareearnedpursuanttothetermsoftheplan.Thebeginningofthecreditedserviceperiodmaybethedateofhireoralaterdate.Forexample,aplanmayprovidebenefitsonlyforservicerenderedafteraspecifiedage.Servicebeyondtheendofthecreditedserviceperioddoesnotearnanyadditionalbenefitsundertheplan....[Statement106]

Curtailment — SeePlan curtailment.

Defined benefit pension plan — Apensionplanthatdefinesanamountofpensionbenefittobeprovided,usuallyasafunctionofoneormorefactorssuchasage,yearsofservice,orcompensation.Anypensionplanthatisnotadefinedcontributionpensionplanis,forpurposesof[Statement87],adefinedbenefitpensionplan.[Statement87]

Defined benefit postretirement plan — Aplanthatdefinespostretirementbenefitsintermsofmonetaryamounts(forexample,$100,000oflifeinsurance)orbenefitcoveragetobeprovided(forexample,upto$200perdayforhospitalization,80percentofthecostofspecifiedsurgicalprocedures,andsoforth).Anypostretirementbenefitplanthatisnotadefinedcontributionpostretirementplanis,forpurposesof[Statement106],adefinedbenefitpostretirementplan.[Statement106]

Defined contribution [pension or] postretirement plan — Aplanthatprovides[pensionor]postretirementbenefitsinreturnforservicesrendered,providesanindividualaccountforeachparticipant,andspecifieshowcontributionstotheindividual’saccountaretobedeterminedratherthanspecifiestheamountofbenefitstheindividualistoreceive.Underadefinedcontribution...plan,thebenefitsaplanparticipantwillreceivedependsolelyontheamountcontributedtotheplanparticipant’saccount,thereturnsearnedoninvestmentsofthosecontributions,andtheforfeituresofotherplanparticipants’benefitsthatmaybeallocatedtothatplanparticipant’saccount.[Statement106]

Discount rates — Theratesusedtoreflectthetimevalueofmoney.Discountratesareusedindeterminingthepresentvalueasofthemeasurementdateoffuturecashflowscurrentlyexpectedtoberequiredtosatisfythe[pensionor]postretirementbenefitobligation....[Statement106]

Expected long-term rate of return on plan assets [(other postretirement benefits)] — Anassumptionabouttherateofreturnonplanassetsreflectingtheaveragerateofearningsexpectedonexistingplanassetsandexpectedcontributionstotheplanduringtheperiod.[Statement106]

Expected long-term rate of return on plan assets [(pensions)] — Anassumptionastotherateofreturnonplanassetsreflectingtheaveragerateofearningsexpectedonthefundsinvestedortobeinvestedtoprovideforthebenefitsincludedintheprojectedbenefitobligation.[Statement87]

Expected return on plan assets —Anamountcalculatedasabasisfordeterminingtheextentofdelayedrecognitionoftheeffectsofchangesinthefairvalueofassets.Theexpectedreturnonplanassetsisdeterminedbasedontheexpectedlong-termrateofreturnonplanassetsandthemarket-relatedvalueofplanassets.[Statement87]


46 Deloitte

Explicit approach to assumptions —Anapproachunderwhicheachsignificantassumptionusedreflectsthebestestimateoftheplan’sfutureexperiencesolelywithrespecttothatassumption....[Statement87]

Fair value[1] — Theamountthataplancouldreasonablyexpecttoreceiveforaninvestmentinacurrentsalebetweenawillingbuyerandawillingseller,thatis,otherthaninaforcedorliquidationsale.[Statement106]

Final-pay formula (Final-pay plan) —Abenefitformulathatbasesbenefitsontheemployee’scompensationoveraspecifiednumberofyearsneartheendoftheemployee’sserviceperiodorontheemployee’shighestcompensationperiods.Forexample,aplanmightprovideannualpensionbenefitsequalto1percentoftheemployee’saveragesalaryforthelastfiveyears(orthehighestconsecutivefiveyears)foreachyearofservice.Afinal-payplanisaplanwithsuchaformula.[Statement87]

Full eligibility (for benefits) — Thestatusofanemployeehavingreachedtheemployee’sfulleligibilitydate.Fulleligibilityforbenefitsisachievedbymeetingspecifiedage,service,orageandservicerequirementsofthe...plan....[Statement106]

Full eligibility date — Thedateatwhichanemployeehasrenderedalloftheservicenecessarytohaveearnedtherighttoreceiveallofthebenefitsexpectedtobereceivedbythatemployee(includinganybeneficiariesanddependentsexpectedtoreceivebenefits).Determinationofthefulleligibilitydateisaffectedbyplantermsthatprovideincrementalbenefitsexpectedtobereceivedbyoronbehalfofanemployeeforadditionalyearsofservice,unlessthoseincrementalbenefitsaretrivial.Determinationofthefulleligibilitydateisnotaffectedbyplantermsthatdefinewhenbenefitpaymentscommenceorbyanemployee’scurrentdependencystatus.[Statement106]

Funded status — Measuredasthedifferencebetweenthefairvalueoftheplanassetsand(a)theprojectedbenefitobligationforpensionplansor(b)theaccumulatedpostretirementbenefitobligationforanyotherpostretirementplan.

Gain or loss [(other postretirement benefits)] — Achangeinthevalueofeithertheaccumulatedpostretirementbenefitobligationortheplanassetsresultingfromexperiencedifferentfromthatassumedorfromachangeinanactuarialassumption,ortheconsequenceofadecisiontotemporarilydeviatefromthesubstantiveplan.Gainsorlossesthatarenotrecognizedinnetperiodicpostretirementbenefitcostwhentheyarisearerecognizedinothercomprehensiveincome.Thosegainsorlossesaresubsequentlyrecognizedasacomponentofnetperiodicpostretirementbenefitcostbasedontherecognitionandamortizationprovisionsof[Statement106].[Statement106,asamended]

Gain or loss [(pensions)] — Achangeinthevalueofeithertheprojectedbenefitobligationortheplanassetsresultingfromexperiencedifferentfromthatassumedorfromachangeinanactuarialassumption.Gainsandlossesthatarenotrecognizedinnetperiodicpensioncostwhentheyarisearerecognizedinothercomprehensiveincome.ThosegainsorlossesaresubsequentlyrecognizedasacomponentofnetperiodicpensioncostbasedontheamortizationprovisionsofStatement87.[Statement87,asamended]

1 FASB Statement No. 157, Fair Value Measurements, which is effective for all companies for financial statements issued for fiscal years beginning after November 15, 2007, amends this definition. Statement 157 defines “fair value” as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date.”


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Gain or loss component (of net periodic pension cost) — Thesumof(a)thedifferencebetweentheactualreturnonplanassetsandtheexpectedreturnonplanassetsand(b)theamortizationofthenetgainorlossrecognizedinaccumulatedothercomprehensiveincome.Thegainorlosscomponentistheneteffectofdelayedrecognitionofgainsandlossesindeterminingnetperiodicpensioncost(thenetchangeinthegainorloss)inaccumulatedothercomprehensiveincomeexceptthatitdoesnotincludechangesintheprojectedbenefitobligationoccurringduringtheperiodanddeferredforlaterrecognitioninnetperiodicpensioncost.[Statement87,asamended]

Gain or loss component (of net periodic postretirement benefit cost) — Thesumof(a)thedifferencebetweentheactualreturnonplanassetsandtheexpectedreturnonplanassets,(b)anygainorlossimmediatelyrecognizedortheamortizationofthenetgainorlossrecognizedinaccumulatedothercomprehensiveincome,and(c)anyamountimmediatelyrecognizedasagainorlosspursuanttoadecisiontotemporarilydeviatefromthesubstantiveplan.Thegainorlosscomponentisgenerallytheneteffectofdelayedrecognitionindeterminingnetperiodicpostretirementbenefitcostofgainsandlosses(thenetchangeinthenetgainorlossrecognizedinaccumulatedothercomprehensiveincome)exceptthatitdoesnotincludechangesintheaccumulatedpostretirementbenefitobligationoccurringduringtheperiodanddeferredforlaterrecognitioninnetperiodicpostretirementbenefitcost.[Statement106,asamended]

Health care cost trend rates — Anassumptionabouttheannualrate(s)ofchangeinthecostofhealthcarebenefitscurrentlyprovidedbythepostretirementbenefitplan,duetofactorsotherthanchangesinthecompositionoftheplanpopulationbyageanddependencystatus,foreachyearfromthemeasurementdateuntiltheendoftheperiodinwhichbenefitsareexpectedtobepaid.Thehealthcarecosttrendratesimplicitlyconsiderestimatesofhealthcareinflation,changesinhealthcareutilizationordeliverypatterns,technologicaladvances,andchangesinthehealthstatusoftheplanparticipants.Differingtypesofservices,suchashospitalcareanddentalcare,mayhavedifferenttrendrates.[Statement106]

Implicit approach to assumptions — Anapproachunderwhichtwoormoreassumptionsdonotindividuallyrepresentthebestestimateoftheplan’sfutureexperiencewithrespecttothoseassumptions.Instead,theaggregateeffectoftheircombineduseispresumedtobeapproximatelythesameasthatproducedbyanexplicitapproach.[Statement87]

Insurance contract — Acontractinwhichaninsurancecompanyunconditionallyundertakesalegalobligationtoprovidespecifiedbenefitstospecificindividualsinreturnforafixedconsiderationorpremium.Aninsurancecontractisirrevocableandinvolvesthetransferofsignificantriskfromtheemployer(ortheplan)totheinsurancecompany....[Statement106]

Interest cost component (of net periodic pension [or postretirement benefit] cost) — Theincreaseintheprojectedbenefitobligation[oraccumulatedpostretirementbenefitobligation]duetopassageoftime.[Statement87]

Measurement date[2] — Thedateasofwhichplanassetsandobligationsaremeasured.[Statement87]

2 Upon an entity’s adoption of the measurement date provisions of Statement 158, plan assets and obligations will be measured as of the date of the fiscal year-end statement of financial position, with certain exceptions. Entities that have not adopted the measurement date provisions of Statement 158 may measure plan assets and obligations as of a date not more than three months prior to the date of the fiscal year-end statement of financial position, if used consistently from year to year.


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Mortality rate — Theproportionofthenumberofdeathsinaspecifiedgrouptothenumberlivingatthebeginningoftheperiodinwhichthedeathsoccur.Actuariesusemortalitytables,whichshowdeathratesforeachage,inestimatingtheamountofpensionbenefitsthatwillbecomepayable.[Statement87]

Multiemployer plan — A[pensionor]postretirementbenefitplantowhichtwoormoreunrelatedemployerscontribute,usuallypursuanttooneormorecollective-bargainingagreements.Acharacteristicofmultiemployerplansisthatassetscontributedbyoneparticipatingemployermaybeusedtoprovidebenefitstoemployeesofotherparticipatingemployerssinceassetscontributedbyanemployerarenotsegregatedinaseparateaccountorrestrictedtoprovidebenefitsonlytoemployeesofthatemployer.Amultiemployerplanisusuallyadministeredbyaboardoftrusteescomposedofmanagementandlaborrepresentativesandmayalsobereferredtoasa“jointtrust”or“unionplan.”Generally,manyemployersparticipateinamultiemployerplan,andanemployermayparticipateinmorethanoneplan.Theemployersparticipatinginmultiemployerplansusuallyhaveacommonindustrybond,butforsomeplanstheemployersareindifferentindustriesandthelaborunionmaybetheironlycommonbond.[Statement106]

Multiple-employer plan — A[pensionor]postretirementbenefitplanmaintainedbymorethanoneemployerbutnottreatedasamultiemployerplan.Multiple-employerplansaregenerallynotcollectivelybargainedandareintendedtoallowparticipatingemployers,commonlyinthesameindustry,topooltheirplanassetsforinvestmentpurposesandtoreducethecostofplanadministration.Amultiple-employerplanmaintainsseparateaccountsforeachemployersothatcontributionsprovidebenefitsonlyforemployeesofthecontributingemployer.Multiple-employerplansmayhavefeaturesthatallowparticipatingemployerstohavedifferentbenefitformulas,withtheemployer’scontributionstotheplanbasedonthebenefitformulaselectedbytheemployer.[Statement106]

Net periodic pension cost —Theamountrecognizedinanemployer’sfinancialstatementsasthecostofapensionplanforaperiod.Componentsofnetperiodicpensioncostareservicecost,interestcost,actualreturnonplanassets,gainorloss,amortizationofpriorservicecostorcredit,andamortizationofthetransitionassetorobligationexistingatthedateofinitialapplicationof[Statement87.][Statement87]usesthetermnetperiodicpensioncostinsteadofnetpensionexpensebecausepartofthecostrecognizedinaperiodmaybecapitalizedalongwithothercostsaspartofanassetsuchasinventory.[Statement87,asamended]

Net periodic postretirement benefit cost — Theamountrecognizedinanemployer’sfinancialstatementsasthecostofapostretirementbenefitplanforaperiod.Componentsofnetperiodicpostretirementbenefitcostincludeservicecost,interestcost,actualreturnonplanassets,gainorloss,amortizationofpriorservicecostorcredit,andamortizationofthetransitionobligationorasset.[Statement106,asamended]

Nonparticipating annuity contract — Anannuitycontractthatdoesnotprovideforthepurchasertoparticipateintheinvestmentperformanceorinotherexperienceoftheinsurancecompany....[Statement87]


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Participant — Anyemployeeorformeremployee,oranymemberorformermemberofatradeorotheremployeeassociation,orthebeneficiariesofthoseindividuals,forwhomthereare...planbenefits.[Statement87]

Pension benefit formula (plan’s benefit formula or benefit formula) — Thebasisfordeterminingpaymentstowhichparticipantsmaybeentitledunderapensionplan.Pensionbenefitformulasusuallyrefertotheemployee’sserviceorcompensationorboth.[Statement87]

Pension benefits — Periodic(usuallymonthly)paymentsmadepursuanttothetermsofthepensionplantoapersonwhohasretiredfromemploymentortothatperson’sbeneficiary.[Statement87]

Plan —Anarrangementthatismutuallyunderstoodbyanemployeranditsemployees,wherebyanemployerundertakestoprovideitsemployeeswithbenefitsaftertheyretireinexchangefortheirservicesoveraspecifiedperiodoftime,uponattainingaspecifiedagewhileinservice,oracombinationofboth.Aplanmaybewrittenoritmaybeimpliedbyawell-defined,althoughperhapsunwritten,practiceofpaying...benefitsorfromoralrepresentationsmadetocurrentorformeremployees....[Statement106]

Plan amendment — Achangeintheexistingtermsofaplan.Aplanamendmentmayincreaseordecreasebenefits,includingthoseattributedtoyearsofservicealreadyrendered.[Statement106]

Plan assets — Assets—usuallystocks,bonds,andotherinvestments—thathavebeensegregatedandrestricted(usuallyinatrust)toprovide...benefits.Theamountofplanassetsincludesamountscontributedbytheemployer(andbyplanparticipantsforacontributoryplan)andamountsearnedfrominvestingthecontributions,lessbenefits,incometaxes,andotherexpensesincurred.Planassetsordinarilycannotbewithdrawnbytheemployerexceptundercertaincircumstanceswhenaplanhasassetsinexcessofobligationsandtheemployerhastakencertainstepstosatisfyexistingobligations.Assetsnotsegregatedinatrust,orotherwiseeffectivelyrestricted,sothattheycannotbeusedbytheemployerforotherpurposesarenotplanassets,eventhoughitmaybeintendedthatthoseassetsbeusedtoprovide...benefits.Amountsaccruedbytheemployerasnetperiodic[pensionor]postretirementbenefitcostbutnotyetpaidtotheplanarenotplanassets.Securitiesoftheemployerheldbytheplanareincludableinplanassetsprovidedtheyaretransferable.Ifaplanhasliabilitiesotherthanforbenefits,thosenonbenefitobligationsareconsideredasreductionsofplanassets.[Statement106]

Plan curtailment — Aneventthatsignificantlyreducestheexpectedyearsoffutureserviceofpresentemployeesoreliminatesforasignificantnumberofemployeestheaccrualofdefinedbenefitsforsomeoralloftheirfutureservices.[Statement87]

Plan demographics — Thecharacteristicsoftheplanpopulationincludinggeographicaldistribution,age,sex,andmaritalstatus.[Statement106]

Appendix APostretirementBenefits

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Plan suspension — Aneventinwhichthepensionplanisfrozenandnofurtherbenefitsaccrue.Futureservicemaycontinuetobethebasisforvestingofnonvestedbenefitsexistingatthedateofsuspension.Theplanmaystillholdassets,paybenefitsalreadyaccrued,andreceiveadditionalemployercontributionsforanyunfundedbenefits.Employeesmayormaynotcontinueworkingfortheemployer.[Statement87]

Plan termination — Aneventinwhichthe[pensionor]postretirementplanceasestoexistandallbenefitsaresettledbythepurchaseofinsurancecontractsorbyothermeans.Theplanmayormaynotbereplacedbyanotherplan.Aplanterminationwithareplacementplanmayormaynotbeinsubstanceaplanterminationforaccountingpurposes.[Statement106]

Postretirement benefits [other than pensions] — Allformsofbenefits,otherthanretirementincome,providedbyanemployertoretirees.Thosebenefitsmaybedefinedintermsofspecifiedbenefits,suchashealthcare,tuitionassistance,orlegalservices,thatareprovidedtoretireesastheneedforthosebenefitsarises,suchascertainhealthcarebenefits,ortheymaybedefinedintermsofmonetaryamountsthatbecomepayableontheoccurrenceofaspecifiedevent,suchaslifeinsurancebenefits.[Statement106]

Postretirement health care benefits — Aformofpostretirementbenefitprovidedbyanemployertoretireesfordefinedhealthcareservicesorcoverageofdefinedhealthcarecosts,suchashospitalandmedicalcoverage,dentalbenefits,andeyecare.[Statement106]

Prepaid pension cost — Cumulativeemployercontributionsinexcessofaccruednetpensioncost.[Statement87]

Prior service cost [(pensions)] — Thecostofretroactivebenefitsgrantedinaplanamendment.[Statement87,asamended]

Prior service cost [(other postretirement benefits)] — Thecostofbenefitimprovementsattributabletoplanparticipants’priorservicepursuanttoaplanamendmentoraplaninitiationthatprovidesbenefitsinexchangeforplanparticipants’priorservice.[Statement106,asamended]

Projected benefit obligation —Theactuarialpresentvalueasofadateofallbenefitsattributedbythepensionbenefitformulatoemployeeservicerenderedpriortothatdate.Theprojectedbenefitobligationismeasuredusingassumptionsastofuturecompensationlevelsifthepensionbenefitformulaisbasedonthosefuturecompensationlevels(pay-related,final-pay,final-average-pay,orcareer-average-payplans).[Statement87]

Retirees — Collectively,thatgroupofplanparticipantsthatincludesretiredemployees,theirbeneficiaries,andcovereddependents[(forpostretirementbenefits)].[Statement106]

Retroactive Benefits — Benefitsgrantedinaplanamendment(orinitiation)thatareattributedbythepensionbenefitformulatoemployeeservicesrenderedinperiodspriortotheamendment.Thecostoftheretroactivebenefitsisreferredtoaspriorservicecost.[Statement87]


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Service — Employmenttakenintoconsiderationunderapensionplan.Yearsofemploymentbeforetheinceptionofaplanconstituteanemployee’spastservice;yearsthereafterareclassifiedinrelationtotheparticularactuarialvaluationbeingmadeordiscussed.Yearsofemployment(includingpastservice)priortothedateofaparticularvaluationconstitutepriorservice;yearsofemploymentfollowingthedateofthevaluationconstitutefutureservice;ayearofemploymentadjacenttothedateofvaluation,orinwhichsuchdatefalls,constitutescurrentservice.[Statement87]

Service cost component (of net periodic pension cost) —Theactuarialpresentvalueofbenefitsattributedbythepensionbenefitformulatoservicesrenderedbyemployeesduringthatperiod.Theservicecostcomponentisaportionoftheprojectedbenefitobligationandisunaffectedbythefundedstatusoftheplan.[Statement87]

Service cost (component of net periodic postretirement benefit cost) — Theportionoftheexpectedpostretirementbenefitobligationattributedtoemployeeserviceduringaperiod.[Statement106]

Settlement — Anirrevocableactionthatrelievestheemployer(ortheplan)ofprimaryresponsibilityforapension[orpostretirement]benefitobligationandeliminatessignificantrisksrelatedtotheobligationandtheassetsusedtoeffectthesettlement....[Statement87]

Single-employer plan — Apension[orpostretirement]planthatismaintainedbyoneemployer.Thetermalsomaybeusedtodescribeaplanthatismaintainedbyrelatedpartiessuchasaparentanditssubsidiaries.[Statement87]

Sponsor —Inthecaseofapension[orpostretirement]planestablishedormaintainedbyasingleemployer,theemployer;inthecaseofaplanestablishedormaintainedbyanemployeeorganization,theemployeeorganization;inthecaseofaplanestablishedormaintainedjointlybytwoormoreemployersorbyoneormoreemployersandoneormoreemployeeorganizations,theassociation,committee,jointboardoftrustees,orothergroupofrepresentativesofthepartieswhohaveestablishedorwhomaintainthe...plan.[Statement87]

Substantive plan —Thetermsofthepostretirementbenefitplanasunderstoodbyanemployerthatprovidespostretirementbenefitsandtheemployeeswhorenderservicesinexchangeforthosebenefits.Thesubstantiveplanisthebasisfortheaccountingforthatexchangetransaction.Insomesituationsanemployer’scost-sharingpolicy,asevidencedbypastpracticeorbycommunicationofintendedchangestoaplan’scost-sharingprovisions,orapastpracticeofregularincreasesincertainmonetarybenefitsmayindicatethatthesubstantiveplandiffersfromtheextantwrittenplan.[Statement106]

Termination benefits — Benefitsprovidedbyanemployertoemployeesinconnectionwiththeirterminationofemployment.Theymaybeeitherspecialterminationbenefitsofferedonlyforashortperiodoftimeorcontractualbenefitsrequiredbythetermsofaplanonlyifaspecifiedevent,suchasaplantclosing,occurs.[Statement106]


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Transition asset —Theamount,asofthedate[Statement87or106]isinitiallyapplied,of(a)thefairvalueofplanassetsplusanyrecognizedaccrued[pensionor]postretirementbenefitcostorlessanyrecognizedprepaid[pensionor]postretirementbenefitcostinexcessof(b)the[projectedbenefitobligationorthe]accumulatedpostretirementbenefitobligation.[Statement106,asamended]

Transition obligation — Theamount,asofthedate[Statement87or106]isinitiallyapplied,of(a)the[projectedbenefitobligationorthe]accumulatedpostretirementbenefitobligationinexcessof(b)thefairvalueofplanassetsplusanyrecognizedaccrued[pensionor]postretirementbenefitcostorlessanyrecognizedprepaid[pensionor]postretirementbenefitcost.[Statement106,asamended]

Turnover — Terminationofemploymentforareasonotherthandeathorretirement.[Statement87]

Unfunded accrued pension cost — Cumulativenetpensioncostaccruedinexcessoftheemployer’scontributions.[Statement87]

Unfunded projected benefit obligation — Theexcessoftheprojectedbenefitobligationoverplanassets.[Statement87]

Vested benefit obligation — Theactuarialpresentvalueofvestedbenefits.[Statement87]

Vested benefits — Benefitsforwhichtheemployee’srighttoreceiveapresentorfuturepensionbenefitisnolongercontingentonremainingintheserviceoftheemployer.(Otherconditions,suchasinadequacyofthepensionfund,maypreventtheemployeefromreceivingthevestedbenefit.)Undergradedvesting,theinitialvestedrightmaybetoreceiveinthefutureastatedpercentageofapensionbasedonthenumberofyearsofaccumulatedcreditedservice;thereafter,thepercentagemayincreasewiththenumberofyearsofserviceorofageuntiltherighttoreceivetheentirebenefithasvested.[Statement87]


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Appendix B — Statement 158 Questions and Answers

Statement 158

1.ThisStatementresultsfromtheinitialphaseofacomprehensiveprojecttoimproveanemployer’saccountingfordefinedbenefitpensionandotherpostretirementplans.TheobjectivesofthisStatementareforanemployerto:

a.Recognizetheoverfundedorunderfundedstatusofasingle-employer1definedbenefitpostretirementplan(benefitplanorplan)asanassetorliabilityinitsstatementoffinancialpositionandtorecognizechangesinthatfundedstatusincomprehensiveincome(forabusinessentity)orchangesinunrestrictednetassets(foranot-for-profitorganization)intheyearinwhichthechangesoccur.

b.Measurethefundedstatusofaplanasofthedateofitsyear-endstatementoffinancialposition,withlimitedexceptions.

ThisStatementdoesnotchangetheaccountingforamultiemployerplan.

2.Thechangestoanemployer’saccountingandreportingforbenefitplansrequiredbythisStatementaredescribedinparagraphs4–22below.Theamendmentstotherecognition,measurementdate,anddisclosurerequirementsofFASBStatementsNo.87,Employers’AccountingforPensions,No.88,Employers’AccountingforSettlementsandCurtailmentsofDefinedBenefitPensionPlansandforTerminationBenefits,No.106,Employers’AccountingforPostretirementBenefitsOtherThanPensions,andNo.132(revised2003),Employers’DisclosuresAboutPensionsandOtherPostretirementBenefits,requiredtoeffectthosechangesareincludedinappendixestothisStatement.ThoseamendmentsareanintegralpartofthisStatement.ThedefinitionsoftermsusedinthisStatementarethesameasthoseinStatements87,88,and106(asamended).

Footnote1—Consistentwithparagraph71ofFASBStatementNo.87,Employers’AccountingforPensions,andparagraph84ofFASBStatementNo.106,Employers’AccountingforPostretirementBenefitsOtherThanPensions,amultiple-employerplanshallbeconsideredasingle-employerplanratherthanamultiemployerplanforpurposesofthisStatement.

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2-1: Impact of Statement 158 on Accounting for Postemployment Benefit Obligations Under Statement 112

Inaspeechatthe1995AICPANationalConferenceonCurrentSECDevelopments,anSECstaffmemberstatedthefollowing:

WhenmeasuringaccumulatingbenefitsbyanalogytoStatements87and106,thestaffdoesnotbelieveitisappropriatetoselectivelyapplythisguidance.Forexample,ifaccumulatingbenefitobligationsarediscountedbasedonaratederivedfromaportfolioofhigh-qualitydebtinstrumentsofsimilarmaturities,thestaffbelievesallothermeasurementprovisionsofStatement87and106,suchasthoseinvolvingattributionmethodsandaccountingforactuarialgainsandlosses,mustbeapplied.

Question

ShouldcompaniesthatapplythemeasurementandrecognitionmodelofStatements87and106totheirpostemploymentobligationsunderStatement112berequiredtoadopttherecognitionmodelofStatement158?

Answer

Yes.Statement158amendsStatements87and106andrequires,amongotherthings,thatanentityrecognizetheoverfundedorunderfundedstatusofadefinedbenefitpostretirementplanasanassetorliability,respectively,inthestatementoffinancialposition,whilerecognizingchangesintheassetandliabilitythroughcomprehensiveincome.CompaniesthathaveappliedtherecognitionmodelofStatements87and106totheirStatement112obligationsshouldadoptthoseprovisionsasamendedbyStatement158,sinceuponStatement158’seffectivedate,thedeferredrecognitionmodelunderStatements87and106willnolongerbeacceptable.

AnSECstaffmemberandaFASBstaffmembersupportedthisviewatthe2006AICPANationalConferenceonCurrentSECandPCAOBDevelopments.However,theSECstaffmembersuggestedthatifanentityhadpreviouslyusedtherecognitionmodelofStatements87and106foritsStatement112plans,itshouldhavefollowedallapplicableprovisions(includingthedisclosurerequirementsofStatement132(R)).IftheentitydidnotfollowallsuchprovisionswhenaccountingforitsStatement112plans,registrantsshouldconsiderconsultingwiththeSECtodeterminewhethertheentity’spracticeswouldresultintheneedtocorrectanerror.

Appendix B PostretirementBenefits

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Recognition of the Funded Status of a Single-Employer Defined Benefit Postretirement Plan

Statement 158

4.Abusinessentitythatsponsorsoneormoresingle-employerdefinedbenefitplansshall:

a.Recognizethefundedstatusofabenefitplan—measuredasthedifferencebetweenthefairvalueofplanassets2andthebenefitobligation—initsstatementoffinancialposition.Forapensionplan,thebenefitobligationshallbetheprojectedbenefitobligation;foranyotherpostretirementbenefitplan,suchasaretireehealthcareplan,thebenefitobligationshallbetheaccumulatedpostretirementbenefitobligation.

b.Aggregatethestatusesofalloverfundedplansandrecognizethatamountasanassetinitsstatementoffinancialposition.Italsoshallaggregatethestatusesofallunderfundedplansandrecognizethatamountasaliabilityinitsstatementoffinancialposition.Abusinessentitythatpresentsaclassifiedstatementoffinancialpositionshallclassifytheliabilityforanunderfundedplanasacurrentliability,anoncurrentliability,oracombinationofboth.Thecurrentportion(determinedonaplan-by-planbasis)istheamountbywhichtheactuarialpresentvalueofbenefitsincludedinthebenefitobligationpayableinthenext12months,oroperatingcycleiflonger,exceedsthefairvalueofplanassets.Theassetforanoverfundedplanshallbeclassifiedasanoncurrentassetinaclassifiedstatementoffinancialposition.

c.Recognizeasacomponentofothercomprehensiveincome3thegainsorlossesandpriorservicecostsorcreditsthatariseduringtheperiodbutarenotrecognizedascomponentsofnetperiodicbenefitcostoftheperiodpursuanttoStatements87and106.

d.Recognizecorrespondingadjustmentsinothercomprehensiveincomewhenthegainsorlosses,priorservicecostsorcredits,andtransitionassetsorobligationsremainingfromtheinitialapplicationofStatements87and106aresubsequentlyrecognizedascomponentsofnetperiodicbenefitcostpursuanttotherecognitionandamortizationprovisionsofStatements87,88,and106.

e.ApplytheprovisionsofFASBStatementNo.109,AccountingforIncomeTaxes,todeterminetheapplicableincometaxeffectsofitems(a)–(d)above.

Footnote2—Paragraph49ofStatement87andparagraph65ofStatement106addressmeasuringplanassetsatfairvalue.Paragraph51ofStatement87andparagraph66ofStatement106provideanexceptiontomeasuringplanassetsatfairvalue.Planassetsusedinplanoperationsshallbemeasuredatcostlessaccumulateddepreciationoramortization.Paragraph61ofStatement87andparagraph69ofStatement106alsoprovideforanon-fair-valuemeasurementofparticipationrightsincertaininsurancecontracts.

Footnote3—AbusinessentitythatisnotrequiredtoreportothercomprehensiveincomepursuanttoFASBStatementNo.130,ReportingComprehensiveIncome,shallapplytheprovisionsofparagraphs8–10ofthisStatementinananalogousmannerthatisappropriateforitsmethodoffinancialreporting.


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4(a)-1: Application of Statement 158 When an Additional Minimum Liability Exists

Question

Howaretheadditionalminimumliability(AML)andrelatedintangibleasset(ifany)thatwererecognizedinaccordancewithStatement87affectedbytheadoptionofStatement158’srecognitionprovisions?

Answer

Statement158amendsStatement87byrequiringthataliabilityequaltotheunderfundedstatusofthedefinedbenefitplanberecorded(measuredastheamountbywhichtheprojectedbenefitobligationexceedsthefairvalueofplanassetsatthemeasurementdate).SincethefullunderfundedstatusisrecognizedupontheadoptionofStatement158,itisnolongernecessarytorecordanAML.

TheAMLandanyrecognizedpension-relatedintangibleasset(bothmeasuredandadjustedimmediatelybeforetheinitialadoptionofStatement158’srecognitionprovisions)shouldbefullyeliminatedupontheadoptionofStatement158’srecognitionprovisions.Whenamountsarealsorecordedinaccumulatedothercomprehensiveincome(AOCI)resultingfromtherecordingofanAMLbeforetheadoptionofStatement158,paragraph16ofStatement158requires,aspartoftheinitialapplicationofitsrecognitionprovisions,thatanentityconsidersuchamountswhenrecordingtheadjustmenttotheendingbalanceofAOCI.

4(b)-1: Classification of Postretirement Benefit Assets and Liabilities in a Classified Statement of Financial Position

Question

Howshouldtheassetsandliabilitiesrecognizedfortheoverfundedandunderfundedstatusofanentity’sdefinedbenefitpostretirementplansbeclassifiedinthestatementoffinancialposition?

Answer

Ifaclassifiedstatementoffinancialpositionispresented,paragraph4(b)ofStatement158requiresthatalloverfundeddefinedpostretirementbenefitplansbeaggregatedandclassifiedasasinglenoncurrentasset.Allunderfundeddefinedpostretirementbenefitplansmustalsobeaggregatedandasingleliabilityrecognized.Thecurrentportionoftheliabilityiscalculatedastheamountbywhichtheactuarialpresentvalueofbenefitsexpectedtobepaidfromtheplantoitsparticipantswithinthenext12months—oroperatingcycle,iflonger—exceedsthefairvalueoftheplan’sassets.Theremainingportionoftheliabilitymustbeclassifiedasnoncurrent.

Statement158alsorequiresthatthecurrentandnoncurrentportionsofthepostretirementliabilitybedeterminedonaplan-by-planbasis.Thatis,acompanycannot,toreducetheamountofcurrentliabilityrecorded,usethefairvalueofassetsinexcessoftheupcomingyear’sexpectedbenefitpaymentsforoneplantooffsetthedeficitofanotherplan.


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Example — Classification of Postretirement Liability Thefollowingtableillustrateshowtodeterminethecurrentandnoncurrentportionsoftheliabilityonaplan-by-planbasis:

Plan A Plan B Total

Expectedbenefitpaymentsinnext12months(oroperatingcycle,iflonger)

$250,000 $250,000

Planassets 2,700,000 100,000

Benefitobligation 3,000,000 3,000,000

Liability $300,000 $2,900,000 $3,200,000

Currentportion $150,000 $150,000

Noncurrentportion $300,000 $2,750,000 $3,050,000

Asthetableindicates,thetotalliabilityrecordedis$3,200,000,with$150,000classifiedascurrentandtheremaining$3,050,000asnoncurrent.

ItisnotappropriatetocombinetheplanassetsandexpectedbenefitpaymentsofPlanAwiththeplanassetsandexpectedpaymentsofPlanBwhendeterminingthecurrentandnoncurrentportionsthatwouldresultintherecordingofasmallercurrentliability.

4(d)-1: Impact of Statement 158 on Net Periodic Benefit Costs

Question

WhatimpactwilltheadoptionofStatement158’srecognitionprovisionshaveonanentity’snetperiodicbenefitcost?

Answer

None.Statement158’srecognitionprovisionsdonotchangehownetperiodicbenefitcostismeasuredorrecognizedinanentity’sincomestatement.

Statement158requires,amongotherthings,thatanentityrecognizeasanassetorliabilitytheoverfundedorunderfundedstatusofitsdefinedpostretirementbenefitplanbyrecordingpreviouslyunrecognizedamounts(i.e.,priorservicecostsandcredits,gainsandlosses,andtransitionassetsandobligations)inothercomprehensiveincome(OCI).DespitetherecognitionoftheseitemsinOCI,suchamountsmustberecognizedascomponentsofnetperiodicbenefitcostpursuanttothecurrentprovisionsofStatements87,88,and106.

However,uponadoptionofStatement158’smeasurementdateprovisions(paragraphs5and6),foranentitythatpreviouslyusedameasurementdatepriortoitsfiscalyear-end,thetiming(nottheamount)oftherecognitionofnetperiodicbenefitcost(whichincludesgainsandlossesfromsettlementsandcurtailments)willbeaffectedinthatsuchcostswillnolongerberecognizedonalaggedbasis.SeeQ&A18(b)-1formoreinformationaboutthetimingofrecognizingtheeffectsofplansettlementsandcurtailments.


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4(d)-2: Foreign Currency Translation of Amounts Reclassified From Accumulated Other Comprehensive Income to Net Periodic Benefit Cost

Background

UponadoptionofStatement158,companiesandtheirsubsidiaries(domesticandforeign)arerequiredtorecognizethefundedstatus1oftheirdefinedbenefitplans.Previouslyunrecognizedamounts(includinggainsorlosses,priorservicecostsorcredits,andtransitionassetsorobligations)willberecorded,netoftax,asacomponentofAOCI.Statement158’srecognitionprovisionsdonotchangehownetperiodicbenefitcostismeasuredorrecognizedinanentity’sfinancialstatements.

AfteradoptionofStatement158,priorservicecostsorcredits,andgainsorlossesthatariseduringtheperiodandthatarenotimmediatelyrecognizedasacomponentofnetperiodicbenefitcost,willberecognizedasacomponentofOCI.Suchamountswillultimatelybereclassifiedtonetperiodicbenefitcostinsubsequentperiods.

Inconsolidation,parentcompanieswithforeignsubsidiariesthatsponsordefinedbenefitplanswillneedtoconsidertheimpactofFASBStatementNo.52,ForeignCurrencyTranslation,ontheamountsrecordedin,andreclassifiedfrom,AOCIasacomponentofnetperiodicbenefitcost.

Shareholders’equityaccounts(e.g.,retainedearnings,AOCI,additionalpaid-incapital)areaccumulatedathistoricalrates.ManyconsiderAOCItobesimilartoretainedearnings;however,theaccountingliteratureisnotexplicitabouttheexchangeratethatcompaniesshouldusetotranslatetheamountsreclassifiedfromAOCItonetperiodicbenefitcost.

Question

AtwhatexchangerateshouldaparentcompanytranslatetheamountsthatitsforeignsubsidiaryreclassifiedfromAOCItonetperiodicbenefitcost?

Answer

Therearetwoacceptableapproaches:(1)thehistoricalexchangerateapproachand(2)thecurrentaverageexchangerateapproach.Theselectionofeitherapproachisanaccountingpolicyelectionandshouldbeappliedconsistentlyafteradoption.

Historical Exchange Rate Approach CompaniesthatelectthisapproachshouldtranslateamountsreclassifiedfromAOCItonetperiodicbenefitcostatthehistoricalexchangeratesineffectatthetimetheamountswereinitiallyrecorded.

Underthisapproach,AOCIisviewedsimilarlytoretainedearnings.InamannerconsistentwiththeapproachrequiredbyStatement52,amountsaccumulatinginretainedearningsarenotretranslatedatacurrentrate(i.e.,retainedearningsdonotfluctuateasaresultofchangesinexchangerates).Similarly,theamountsreclassifiedfromAOCItonetperiodicbenefitcostarenotretranslated.

1 The funded status is measured as the difference between the fair value of plan assets and the benefit obligation.


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FASBStatementNo.130,ReportingComprehensiveIncome,“usesthetermcomprehensiveincometodescribethetotalofallcomponentsofcomprehensiveincome,includingnetincome.”Also,Statement130“usesthetermothercomprehensiveincometorefertorevenues,expenses,gains,andlossesthatundergenerallyacceptedaccountingprinciplesareincludedincomprehensiveincomebutexcludedfromnetincome.”TheamountsinitiallyrecordedinOCI,whicharetranslatedeitherattherateineffectatthedateofthetransactionorattheaverageratefortheperiod,determinetheamountthatwillbereclassifiedfromAOCItonetperiodicbenefitcost.UseofthehistoricalratetoreclassifyamountsfromAOCItonetincomeasacomponentofnetperiodbenefitcostisconsistentwiththeprinciplesofStatement130;comprehensiveincomedoesnotchange.

Current Average Exchange Rate Approach CompaniesthatelectthisapproachshouldtranslateamountsreclassifiedfromAOCItonetperiodicbenefitcostatthecurrentaverageexchangeratefortheperiodinwhichthereclassificationfromAOCIismade(i.e.,theexchangerateusedtotranslaterevenuesandexpenses).

ThisapproachissupportedbytheBoard’sviewasexpressedinparagraphB36ofStatement158,whichdescribestheStatement’sobjectiveasfollows:

[T]heobjectiveofthisStatement[is]nottochangehownetperiodicbenefitcostisdetermined.

TheobjectiveofthisapproachisconsistencywiththatoftheapproachusedbeforeStatement158.Unrecognizedpriorservicecosts/credits,netgainsorlosses,andtranslationobligations/assetsremainedoff-balance-sheetandweretranslatedattheaverageexchangerateswhentheseamountswererecognizedinnetperiodicbenefitcosts.ThisisconsistentwiththeStatement52approachforincomestatementitems.

4(e)-1: Income Tax Effects on Medicare Part D Subsidy Receipts

Question

ShouldactuarialgainsfromsubsidyreceiptsundertheMedicarePrescriptionDrug,Improvement,andModernizationActof2003(the“Act”)berecordednetofincometaxwhenrecognizingsuchamountsinAOCI?

Answer

No.ThesubsidyreceivedundertheActisnotconsideredtaxableincometotheemployerforfederalincometaxpurposes.Paragraph19ofFASBStaffPositionNo.FAS106-2,“AccountingandDisclosureRequirementsRelatedtotheMedicarePrescriptionDrug,ImprovementandModernizationActof2003,”indicatesthatintheperiodsinwhichthesubsidyaffectstheemployer’saccountingfortheplan,thesubsidyshouldhavenoeffectonanyplan-relatedtemporarydifferenceaccountedforunderFASBStatementNo.109,AccountingforIncomeTaxes.Therefore,whenStatementof158isadopted,nodeferredtaxesshouldberecordedwhenrecognizinginAOCItheportionofunrecognizedactuarialgainthatisrelatedtothesubsidyprovidedforbytheAct.

Appendix BPostretirementBenefits

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Inaddition,nodeferredtaxassetsorliabilitiesshouldberecognizedwhenrecordingfutureactuarialgainsorlossesinAOCIthatarisefromthesubsidyreceivedortobereceivedundertheActinyearsaftertheadoptionofStatement158.

Measurement Date of Plan Assets and Benefit Obligations Statement 158

5.Abusinessentityshallmeasureplanassetsandbenefitobligationsasofthedateofitsfiscalyear-endstatementoffinancialpositionunless:

a.Theplanissponsoredbyasubsidiarythatisconsolidatedusingafiscalperiodthatdiffersfromitsparent’s,aspermittedbyARBNo.51,ConsolidatedFinancialStatements.

b.TheplanissponsoredbyaninvesteethatisaccountedforusingtheequitymethodofaccountingunderAPBOpinionNo.18,TheEquityMethodofAccountingforInvestmentsinCommonStock,usingfinancialstatementsoftheinvesteeforafiscalperiodthatisdifferentfromtheinvestor’s,aspermittedbyOpinion18.

Inthosecases,abusinessentityshallmeasurethesubsidiary’splanassetsandbenefitobligationsasofthedateusedtoconsolidatethesubsidiary’sstatementoffinancialpositionandshallmeasuretheinvestee’splanassetsandbenefitobligationsasofthedateoftheinvestee’sfinancialstatementsusedtoapplytheequitymethod.Forexample,ifacalendaryear-endparentconsolidatesasubsidiaryusingthesubsidiary’sSeptember30financialstatements,thefundedstatusofthesubsidiary’sbenefitplanincludedintheconsolidatedfinancialstatementsshallbemeasuredasofSeptember30.

6.Unlessabusinessentityremeasuresbothitsplanassetsandbenefitobligationsduringthefiscalyear,thefundedstatusitreportsinitsinterim-periodstatementoffinancialpositionshallbethesameassetorliabilityrecognizedinthepreviousyear-endstatementoffinancialpositionadjustedfor(a)subsequentaccrualsofnetperiodicbenefitcostthatexcludetheamortizationofamountspreviouslyrecognizedinothercomprehensiveincome(forexample,subsequentaccrualsofservicecost,interestcost,andreturnonplanassets)and(b)contributionstoafundedplan,orbenefitpayments.Sometimes,abusinessentityremeasuresbothplanassetsandbenefitobligationsduringthefiscalyear.Thatisthecase,forexample,whenasignificanteventsuchasaplanamendment,settlement,orcurtailmentoccursthatcallsforaremeasurement.Uponremeasurement,abusinessentityshalladjustitsstatementoffinancialpositioninasubsequentinterimperiod(onadelayedbasisifthemeasurementdateprovisionsofthisStatementhavenotyetbeenimplemented)toreflecttheoverfundedorunderfundedstatusoftheplanconsistentwiththatmeasurementdate.

5-1 and 5-2: Plan Measurements Under Statement 158

Question

UnderStatement158,howoftenisanentityrequiredtomeasurethefairvalueofitsplanassetsandbenefitobligations?


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Answer

Statement158doesnotchangehowoftenanentityisrequiredtoperformplanmeasurementsunderStatements87,88,and106;rather,itchangeswhenthosemeasurementsarerequiredtobeperformed(i.e.,asofthedateoftheentity’sfiscalyear-endstatementoffinancialposition),whichbecomeseffectiveforfiscalyearsendingafterDecember15,2008.Anentitymaymeasureitsplanassetsandbenefitobligationsmultipletimesthroughouttheyear;however,ameasurementisrequiredtobeperformedatleastonceannuallyormoreoftenwhencertaineventsoccur(e.g.,aplansettlement,aplancurtailment,aplanamendmentconsideredtobematerial).

Question

AftertheadoptionofStatement158’smeasurementdateprovisions,underwhatcircumstanceswoulditbeappropriateforacompanynottoalignthemeasurementdatewiththedateofitsfiscalyear-endstatementoffinancialposition?

Answer

Statement158containstwoexceptionstotherequirementforaligningthemeasurementdatewiththedateofthecompany’sfiscalyear-endstatementoffinancialposition.Thefirstexceptionisoutlinedinparagraph5(a)ofStatement158,whichprovidesthatifasubsidiaryistheplansponsorandisconsolidatedbyusingafiscalperioddifferentfromthatofitsparent,theparentshouldmeasurethesubsidiary’spostretirementbenefitplanassetsandbenefitobligationsasofthesamedateusedtoconsolidatethesubsidiary.Forexample,ifacalendar-year-endparentconsolidatesitssubsidiarybyusingthesubsidiary’sNovember30financialstatementsandifthesubsidiaryistheplansponsor,thefundedstatusofthatsubsidiary’splanshouldbemeasuredasofNovember30(i.e.,thedateusedtoconsolidatethesubsidiary’sstatementoffinancialposition).

Thesecondexceptionisoutlinedinparagraph5(b)ofStatement158,whichprovidesthatiftheplanissponsoredbyanequitymethodinvesteeandthefinancialstatementsoftheequitymethodinvesteearenotavailableintimefortheinvestortocurrentlyapplytheequitymethod,theinvestorshouldmeasuretheinvestee’splanassetsandbenefitobligationsasofthedateoftheinvestee’sfinancialstatementsthatwereusedtoapplytheequitymethod.Thismayrequiretheequitymethodinvesteetoperformmorethanonemeasurementofitsplanassetsandbenefitobligationsinoneyear.

Example — Equity Method Investee Anequitymethodinvesteeanditsinvestoreachhaveacalendaryear-end.Onthebasisofwhentheequitymethodinvestee’sfinancialstatementswillbecomeavailable,theinvestoraccountsforitsequitymethodinvestmentonaone-monthlag(i.e.,theinvestorusestheequitymethodinvestee’sNovember30financialstatementstorecorditsequitypickupinitsDecember31financialstatements).Underparagraph5ofStatement158,theequitymethodinvesteeisrequiredtomeasureitsplanassetsandbenefitobligationsasofNovember30fortheinvestor’sfinancialstatementsandagainasofDecember31foritsownstand-alonefinancialstatements.


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6-1: Postretirement Benefit Plan Asset/Liability Recognition and Interim Financial Reporting

Question

Forinterimreportingpurposes,shouldtheassetorliabilityrepresentingthefundedstatusofapostretirementbenefitplanbeadjustedfromthepreviousyear-endtoreflectaccrualsandcontributionsduringtheinterimperiod?

Answer

Yes.Inaccordancewithparagraph6,theassetorliabilityshouldbeadjustedforcontributionsmadeduringtheinterimperiodandforthosecomponentsofnetperiodicbenefitcostnotyetrecognizedintheassetorliability.Componentsthatshouldaffecttheassetorliabilityininterimperiodsincludeservicecost,interestcost,andreturnonplanassets(ifany).Thecomponentsofnetperiodicbenefitcostthatdonotaffecttheassetorliabilityduringaninterimperiodbecausesuchamountshavealreadybeenrecognizedaspartoftheassetorliabilityincludetheamortizationof(1)priorservicecosts/credits,(2)nettransitionobligation/asset,and(3)netgain/loss(ifanyisamortized).However,OCIshouldbeadjustedeachperiodassuchamountsareamortizedandincludedinnetperiodicbenefitcost.

Iftheplanassetsandbenefitobligationareremeasuredduringtheyear,theassetorliabilityshouldbeadjustedtoreflecttheupdatedfundedstatusoftheplan,withtherelatedchangeintheunrecognizedamountsbeingrecordedinOCIasrequiredbyparagraph4(c).

Disclosure Requirements Statement 158

7.Abusinessentitythatsponsorsoneormorebenefitplansshalldisclosethefollowinginformationinthenotestoitsannualfinancialstatements,separatelyforpensionplansandotherpostretirementbenefitplans:

a.Foreachannualstatementofincomepresented,theamountsrecognizedinothercomprehensiveincome,showingseparatelythenetgainorlossandnetpriorservicecostorcredit.Thoseamountsshallbeseparatedintoamountsarisingduringtheperiodandreclassificationadjustmentsofothercomprehensiveincomeasaresultofbeingrecognizedascomponentsofnetperiodicbenefitcostfortheperiod.

b.Foreachannualstatementofincomepresented,thenettransitionassetorobligationrecognizedasareclassificationadjustmentofothercomprehensiveincomeasaresultofbeingrecognizedasacomponentofnetperiodicbenefitcostfortheperiod.

c.Foreachannualstatementoffinancialpositionpresented,theamountsinaccumulatedothercomprehensiveincomethathavenotyetbeenrecognizedascomponentsofnetperiodicbenefitcost,showingseparatelythenetgainorloss,netpriorservicecostorcredit,andnettransitionassetorobligation.


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Statement 158

d.Theamountsinaccumulatedothercomprehensiveincomeexpectedtoberecognizedascomponentsofnetperiodicbenefitcostoverthefiscalyearthatfollowsthemostrecentannualstatementoffinancialpositionpresented,showingseparatelythenetgainorloss,netpriorservicecostorcredit,andnettransitionassetorobligation.

e.Theamountandtimingofanyplanassetsexpectedtobereturnedtothebusinessentityduringthe12-monthperiod,oroperatingcycleiflonger,thatfollowsthemostrecentannualstatementoffinancialpositionpresented.

7-1: Statement 158 Disclosures in Interim Periods After AdoptionQuestion

Dothedisclosuresrequiredbyparagraph7ofStatement158havetobecarriedforwardininterim-periodfinancialstatementsissuedaftertheinitialadoptionofStatement158’srecognitionandrelateddisclosureprovisions?

Answer

No.TheSECstaffhasgenerallyinterpretedSECRegulationS-X,Rule10-01(a)(5),asrequiringregistrantstoincludealldisclosuresrequiredbynewlyadoptedaccountingstandardssothattheinteriminformationpresentedisnotmisleading.Furthermore,ifanewstandardisadoptedinaninterimperiod,thentheinterim-periodfinancialstatementsshouldinclude,totheextentapplicable,alldisclosuresidentifiedintheadoptedstandardthatmustbeincludedinannualfinancialstatements.SuchdisclosuresshouldcontinuetobemadeonaninterimbasisuntilthefirstForm10-Kisfiledafteradoption.However,sincetherecognitionandrelateddisclosureprovisionsforStatement158arerequiredtobeadoptedasoftheendofthefiscalyear(seeparagraphs12–13ofStatement158),suchdisclosureswillalreadyhavebeenincludedinaForm10-K,thusmakingdisclosureinsubsequentinterimperiodsunnecessary.

However,thedisclosuresrequiredbyparagraph14ofStatement158shouldcontinuetobedisclosedinanyannualorinterimfinancialstatementsuntiltherecognitionprovisionsofStatement158havebeenadopted.Paragraph14requiresthatacompanywithoutpubliclytradedequitysecuritiesdisclosethefollowinginitsfinancialstatementsforafiscalyearendingafterDecember15,2006,butbeforeJune16,2007:

AbriefdescriptionofStatement158’sprovisions.

Thedateonwhichadoptionisrequired.

ThedatethecompanyplanstoadopttherecognitionprovisionsofStatement158.

SECfilersthatdonothavepubliclytradedequitysecurities(e.g.,companieswithpubliclytradeddebtsecurities)arestillrequiredtofollowthedisclosurerequirementsofSECStaffAccountingBulletinNo.74,codifiedasSABTopic11.M,“DisclosureoftheImpactThatRecentlyIssuedAccountingStandardsWillHaveontheFinancialStatementsoftheRegistrantWhenAdoptedinaFuturePeriod,”forperiodspriortoadoption,which,inadditiontotheabove,wouldrequiredisclosureoftheestimatedimpact(ifknown)theadoptionofStatement158willhaveonthecompany’sfinancialstatements.

•

•

•


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Effective DatesStatement 158

11.ThisStatementprovidesdifferenteffectivedatesfortherecognitionandrelateddisclosureprovisionsandfortherequiredchangetoafiscalyear-endmeasurementdate.Also,theeffectivedateoftherecognitionanddisclosureprovisionsdiffersforanemployerthatisanissuerofpubliclytradedequitysecuritiesfromonethatisnot.ForpurposesofthisStatement,anemployerisdeemedtohavepubliclytradedequitysecuritiesifanyofthefollowingconditionsismet:

a.Theemployerhasissuedequitysecuritiesthattradeinapublicmarket,whichmaybeeitherastockexchange(domesticorforeign)oranover-the-countermarket,includingsecuritiesquotedonlylocallyorregionally.

b.Theemployerhasmadeafilingwitharegulatoryagencyinpreparationforthesaleofanyclassofequitysecuritiesinapublicmarket.

c.Theemployeriscontrolledbyanentitycoveredby(a)or(b).

Effective Dates for Recognition and Related Disclosure Provisions

12.Anemployerwithpubliclytradedequitysecuritiesshallinitiallyapplytherequirementtorecognizethefundedstatusofabenefitplan(paragraph4)andthedisclosurerequirements(paragraph7)asoftheendofthefiscalyearendingafterDecember15,2006.Applicationasoftheendofanearlierfiscalyearisencouraged;however,earlyapplicationshallbeforallofanemployer’sbenefitplans.

13.Anemployerwithoutpubliclytradedequitysecuritiesshallinitiallyapplytherequirementtorecognizethefundedstatusofabenefitplan(paragraphs4and8)andthedisclosurerequirements(paragraphs7and10)asoftheendofthefiscalyearendingafterJune15,2007.Applicationasoftheendofanearlierfiscalyearisencouraged;however,earlyapplicationshallbeforallofanemployer’sbenefitplans.

14.AnemployerwithoutpubliclytradedequitysecuritiesshalldisclosethefollowinginformationinthenotestothefinancialstatementsforafiscalyearendingafterDecember15,2006,butbeforeJune16,2007,unlessithasappliedtherecognitionprovisionsofthisStatementinpreparingthosefinancialstatements:

a.AbriefdescriptionoftheprovisionsofthisStatement

b.Thedatethatadoptionisrequired

c.ThedatetheemployerplanstoadopttherecognitionprovisionsofthisStatement,ifearlier.

Effective Date for Measurement Date Provisions

15.Therequirementtomeasureplanassetsandbenefitobligationsasofthedateoftheemployer’sfiscalyear-endstatementoffinancialposition(paragraphs5,6,and9)shallbeeffectiveforfiscalyearsendingafterDecember15,2008,andshallnotbeappliedretrospectively.Earlierapplicationisencouraged;however,earlyapplicationshallbeforallofanemployer’sbenefitplans.Therequirementinparagraphs5(k)and8(j)ofStatement132(R)todisclosethemeasurementdateiseliminated,effectiveintheyeartheemployerinitiallyadoptsthemeasurementdateprovisionsofthisStatement.


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15-1: Early Adoption of Measurement Date Provisions of Statement 158

Statement158,issuedinSeptember2006,requiresanentitytomeasureplanassetsandbenefitobligationsasofthedateofitsfiscalyear-endbalancesheet.ThisrequirementiseffectiveforfiscalyearsendingafterDecember15,2008,withretrospectiveapplicationprohibited;however,earlierapplicationofthemeasurementdateprovisionsisencouraged.

Question

MayanentityearlyadoptthemeasurementdateprovisionsofStatement158undertheparagraph19transitionguidanceinitsfirstannualfinancialstatementsforafiscalyearendingafterSeptember29,2006(i.e.,theissuancedateofStatement158),toalignthemeasurementdatewithitsfiscalyear-endbalancesheet?

Answer

Yes,ifcertainconditionsaremet.Theentitymusthaveadopted,ormustbeadoptingatthesametimeasthemeasurementdateprovisions,therecognitionprovisionsofStatement158.InformaldiscussionswiththeFASBstaffhaveindicatedthatapplyingthemeasurementdateprovisionsunderStatement158shouldnotprecedetheapplicationoftheStatement’srecognitionprovisions.

Inaddition,anentitymayearlyadoptthemeasurementdateprovisionsunderparagraph19onlyifduringtheperiodbetweentheprior-yearmeasurementdateandthedateofthelatestissuedfinancialstatements(whetherinterimorannualfinancialstatements),theentity’splanhasnothadanysignificanteventsoccurthatwouldrequireaplanremeasurement(e.g.,plancurtailments,settlements,oramendments)ortheentityperformedavoluntaryplanremeasurement.Theaccountingeffectsofsuchevents,priortotheadoptionofStatement158’smeasurementdateprovisions,wouldhavebeenrecognizedonalaggedbasisandpotentiallyinadifferentreportingperiod.However,upontheadoptionofStatement158’smeasurementdateprovisions,sucheffectsarerecognizedintheperiodtheyoccur,2beginningwiththeperiodthatbeginsafterthemeasurementdatethatisusedfortheimmediatelyprecedingfiscalyear-end.Inaddition,paragraph19(b)specificallystates,inpart:

Thisprovisionprohibitsanemployerfromearlyapplicationofthemeasurementdateprovisionswhentheemployerhasissuedfinancialstatementsfortheprioryearwithoutrecognitionofsuchasettlementorcurtailment.

BecauseretrospectiveapplicationofStatement158isnotpermitted,iftheentityhashadsuchaneventoccurduringtheperiodbetweentheprior-yearmeasurementdateandthedateofitslatestissuedfinancialstatements,theearliesttheentitycouldadoptthemeasurementdateprovisionswouldbeinitsnextfiscalyear-endfinancialstatements(e.g.,the2007year-endfinancialstatementsforacalendar-year-endcompany).

Anentitythatdoesnotmeettheconditionsoutlinedabovemaychangeitsmeasurementdatetoalignwithitsfiscalyear-end;however,thetransitionprovisionsofStatement158wouldnotbeavailable.TheentitywouldberequiredtodemonstratepreferabilityforthechangeinitsmeasurementdateandapplytheguidanceinFASBStatementNo.154,AccountingChangesandErrorCorrections.

2 Note that for curtailments, a loss is considered to have occurred when the loss is probable and estimable and a gain is considered to have occurred when the related employees have terminated or the plan suspension or amendment has been adopted. See paragraph 14 of Statement 88 and paragraph 99 of Statement 106.


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Example — Public Entity Acalendar-year-endpublicentitywithanannualmeasurementdateofSeptember30wantstoearlyadoptthemeasurementdateprovisionsofStatement158byusingtheparagraph19transitionguidancetoalignitsmeasurementdatewithitsfiscalyear-endbalancesheetdateonDecember31,2006.AssumingtheentityhasalreadyissueditsSeptember30,2006,interimfinancialstatements,theentitycouldearlyadoptthemeasurementdateprovisionsinitsDecember31,2006,financialstatementsiftheplanhasnotexperiencedasignificanteventthatrequiresaccountingforacurtailment,settlement,oramendment,whichrequiredaplanremeasurementduringtheperiodfromSeptember30,2005,throughSeptember30,2006.Iftheplanexperiencesanyoftheseeventsinthefourthquarterof2006,theeffectsofthoseeventsshouldberecognizedinthatperiod.

Example — Nonpublic Entity Assumethesamefactsasinthepublic-entityexample,exceptthattheentityisnonpublic,doesnotissueinterimfinancialstatements,andhasissuedits2005year-endfinancialstatements.TheentitycouldearlyadoptthemeasurementdateprovisionsinitsDecember31,2006,financialstatementsiftheplanhasnotexperiencedasignificanteventthatrequiresaccountingforacurtailment,settlement,oramendment,whichrequiredaplanremeasurementduringtheperiodfromSeptember30,2005,throughDecember31,2005.Sincetheentitydoesnotissueinterimfinancialstatements,theentitywillberecognizingtheeffectsofsucheventsinthereportingperiodinwhichtheyoccur.3Iftheplanexperiencesanyoftheseeventsduring2006,theeffectsofthoseeventsshouldberecognizedinthatyear.Inaddition,theentitymustearlyadoptStatement158’srecognitionprovisionsasofDecember31,2006.

Transition — Recognition Provisions Statement 158

16.AnemployershallapplytherecognitionprovisionsofthisStatementasoftheendofthefiscalyearofinitialapplication.Retrospectiveapplicationisnotpermitted.Theamountsrecognizedinanemployer’sstatementoffinancialpositionasoftheendofthefiscalyearbeforeapplyingthisStatement,includingamountsrequiredtorecognizeanyadditionalminimumpensionliability,shallbeadjustedsothat:

a.Forabusinessentity,gainsorlosses,priorservicecostsorcredits,andtransitionassetsorobligationsthathavenotyetbeenincludedinnetperiodicbenefitcostasoftheendofthefiscalyearinwhichtheStatementisinitiallyappliedarerecognizedascomponentsoftheendingbalanceofaccumulatedothercomprehensiveincome,netoftax.Anyrequiredadjustmentshallbereportedasanadjustmentoftheendingbalanceofaccumulatedothercomprehensiveincome.

b.Foranot-for-profitemployer,gainsorlosses,priorservicecostsorcredits,andtransitionassetsorobligationsthathavenotyetbeenincludedinnetperiodicbenefitcostasoftheendofthefiscalyearinwhichthisStatementisinitiallyappliedareincludedintheendingbalanceofunrestrictednetassets,netoftax,ifany.Anyrequiredadjustmentshallbereportedinthestatementofactivities,inaseparatelineitemoritemswithinchangesinunrestrictednetassets,apartfromexpensesandoutsideaperformanceindicatororotherintermediatemeasureofoperations,ifoneispresented.



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16-1: Measuring AML and Recording Changes in OCI Before Adopting State-ment 158

Question

MustentitiesmeasureandrecordchangesintheirAMLtocomprehensiveincomebeforeadoptingStatement158?

Answer

Yes.WhenentitiesadopttherecognitionprovisionsofStatement158,theywillnolongerrecognizeanAML.Statement158eliminatestheAMLbyrequiringfullrecognitionofthefundedstatusofanentity’sdefinedbenefitpensionplanasanassetorliabilityinitsyear-endbalancesheet.Becausetherecognitionprovisionsaretobeadoptedasoftheendoftheyear,an entity is first required to measure and record changes to its previously recognized AML4 through comprehensive income based on its measurement date used for current year-end reporting.Anentityshouldapplythefollowingtwo-stepapproachtoadoptingtherecognitionprovisionsofStatement158asoftheendofitsfiscalyear(asrequiredbyparagraph16ofStatement158):

1.Followtheprovisionsofparagraphs35–38ofStatement87(priortoamendmentbyStatement158),todetermineprepaidoraccruedpensioncost(includingchangestotheAML,ifapplicable)basedonthemeasurementdatetheentityusedforcurrentyear-endreporting.5

2.ApplyStatement158’srecognitionprovisionstofullyrecognizethefundedstatusofthedefinedbenefitpensionplan.6

Theadjustmentsrecordedinstep1representtheaccountingforanentity’spensionplanunderStatement87throughouttheyearanduptothepointofadoptingStatement158atyear-end.AnyadjustmentstotheAMLthatwouldhavebeenrecordedasacomponentofcomprehensiveincomebeforeStatement158isconsideredshouldcontinuetoberecordedincomprehensiveincome.Theadjustmentsinstep2shouldreflectonlythe incremental impact ofadoptingStatement158’srecognitionprovisions(calculatedasthedifferencebetweentheplan’sfundedstatusandtheamountsrecognizedinstep1).Asparagraph16ofStatement158indicates,anyincrementalamountsrequiringrecognitioninAOCIunderstep2mustberecordedasadirect adjustment to the ending balance of AOCIandnotasacomponentofcomprehensiveincome.

Example Acalendar-year-endentitywithaDecember31measurementdateadoptstherecognitionprovisionsofStatement158inits2006year-endfinancialstatements.ThetablebelowdetailstheamountsincludedinAOCIrelatedtoitspensionplanforthefollowingperiods:

4 Changes in the AML could include recording an AML for the first time.5 See Question 37 of FASB Staff Implementation Guide, “A Guide to Implementation of Statement 87 on Employers’ Accounting for Pensions: Questions and Answers,” for an illustrative example.

6 See Example 1 in Appendix A of Statement 158 for guidance on the application of Statement 158’s recognition provisions.


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December 31, 2005

December 31, 2006 (before the adoption of

Statement 158)

December 31, 2006 (after the adoption of

Statement 158)

AMLincludedinAOCI7 $(1,000) $(1,200) NA

AmountincludedinAOCIaftertheadoptionofStatement1587 NA NA $(2,000)

The$200increaseintheAMLincludedinAOCIfromDecember31,2005,toDecember31,2006(beforetheadoptionofStatement158),shouldberecordedasacomponentofcomprehensiveincome(step1).The$800increaserelatedtothedifferencebetweentheAMLincludedinAOCIbeforetheadoptionofStatement158andtheamountincludedinAOCIaftertheadoptionofStatement158isrecordedasadirectadjustmenttotheendingbalanceofAOCItofullyrecognizethefundedstatusoftheentity’spensionplan(step2).

Transition — Measurement Date Provisions Statement 158

17.ThisStatementprovidestwoapproachesforanemployertotransitiontoafiscalyear-endmeasurementdate.Inthefirstapproach(paragraph18),anemployerremeasuresplanassetsandbenefitobligationsasofthebeginningofthefiscalyearthatthemeasurementdateprovisionsareapplied.Anemployerusesthosenewmeasurementstodeterminetheeffectsofthemeasurementdatechangeasofthebeginningofthefiscalyearthatthemeasurementdateprovisionsareapplied.Inthesecondapproach(paragraph19),anemployercontinuestousethemeasurementsdeterminedforthepriorfiscalyear-endreportingtoestimatetheeffectsofthechange.

18.Underthefirstapproach,anemployershallmeasureplanassetsandbenefitobligationsasofthebeginningofthefiscalyearthatthemeasurementdateprovisionsareapplied.Foranemployerthatisabusinessentity:

a.Netperiodicbenefitcostfortheperiodbetweenthemeasurementdatethatisusedfortheimmediatelyprecedingfiscalyear-endandthebeginningofthefiscalyearthatthemeasurementdateprovisionsareapplied,exclusiveofanycurtailmentorsettlementgainorloss,shallberecognized,netoftax,asaseparateadjustmentoftheopeningbalanceofretainedearnings.Thatis,thepretaxamountrecognizedasanadjustmenttoretainedearningsisthenetperiodicbenefitcostthatwithoutachangeinmeasurementdateotherwisewouldhavebeenrecognizedonadelayedbasisduringthefirstinterimperiodforthefiscalyearthatthemeasurementdateprovisionsareapplied.

b.Anygainorlossarisingfromacurtailmentorsettlementbetweenthemeasurementdatethatisusedfortheimmediatelyprecedingfiscalyear-endandthebeginningofthefiscalyearthatthemeasurementdateprovisionsareappliedshallberecognizedinearningsinthatperiodandnotasanadjustmenttoretainedearnings.Thisprovisionprohibitsanemployerfromearlyapplicationofthemeasurementdateprovisionswhentheemployerhasissuedfinancialstatementsfortheprioryearwithoutrecognitionofsuchasettlementorcurtailment.

7 Amounts are net of tax.


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Statement 158

Forexample,assumeanemployerwithaJune30year-endthatusedaMarch31measurementdatecurtaileditsbenefitplanonMay31,2006,resultinginacurtailmentloss.Thatemployerwouldbeabletoapplyearlythemeasurementdateprovisionsinfiscalyear2007ifitrecognizestheMay31,2006curtailmentlossinitsfinancialstatementsfortheyearendingJune30,2006.Thatwouldnotbethecaseifits2006financialstatementshadbeenissuedbeforeitwishedtoearlyadoptforfiscalyear2007.

c.Otherchangesinthefairvalueofplanassetsandthebenefitobligations(forexample,gainsorlosses)fortheperiodbetweenthemeasurementdatethatisusedfortheimmediatelyprecedingfiscalyear-endandthebeginningofthefiscalyearthatthemeasurementdateprovisionsareappliedshallberecognized,netoftax,asaseparateadjustmentoftheopeningbalanceofaccumulatedothercomprehensiveincomeforthefiscalyearthatthemeasurementdateprovisionsareapplied.

Theguidanceinthisparagraphalsoshallapplytoanot-for-profitemployer,exceptthattheadjustmentsthatwouldbemadetotheopeningbalancesofretainedearningsandaccumulatedothercomprehensiveincomeshallinsteadberecognizedasachangeinunrestrictednetassetsinthestatementofactivities,netoftax,ifany.Thoseamountsshallbereportedinaseparatelineitemoritemsapartfromexpensesandoutsideaperformanceindicatororotherintermediatemeasureofoperations,ifoneispresented.

19.Inlieuofremeasuringplanassetsandbenefitobligationsasofthebeginningofthefiscalyearthatthemeasurementdateprovisionsareapplied,underthesecondapproach,anemployershalluseearliermeasurementsdeterminedforyear-endreportingasofthefiscalyearimmediatelyprecedingtheyearthatthemeasurementdateprovisionsareapplied.Foranemployerthatisabusinessentity:

a.Netperiodicbenefitcostfortheperiodbetweentheearliermeasurementdateandtheendofthefiscalyearthatthemeasurementdateprovisionsareapplied,exclusiveofanycurtailmentorsettlementgainorloss,shallbeallocatedproportionatelybetweenamountstoberecognizedasanadjustmentofretainedearningsandnetperiodicbenefitcostforthefiscalyearthatthemeasurementdateprovisionsareapplied.Forexample,acalendar-yearemployerthatusesaSeptember30measurementdateandhasnosettlementorcurtailmentduringtheperiodwouldallocateasanadjustmentofretainedearningsthree-fifteenthsofnetperiodicbenefitcostdeterminedfortheperiodfromSeptember30,2007,toDecember31,2008.Theremainingtwelve-fifteenthswouldberecognizedasnetperiodicbenefitcostforthefiscalyearthatthemeasurementdateprovisionsfirstareapplied.

b.Anygainorlossarisingfromacurtailmentorsettlementbetweenthemeasurementdatethatisusedfortheimmediatelyprecedingfiscalyear-endandthebeginningofthefiscalyearthatthemeasurementdateprovisionsareappliedshallberecognizedinearningsinthatperiodandnotasanadjustmenttoretainedearnings.Thisprovisionprohibitsanemployerfromearlyapplicationofthemeasurementdateprovisionswhentheemployerhasissuedfinancialstatementsfortheprioryearwithoutrecognitionofsuchasettlementorcurtailment(seeparagraph18(b)).


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Statement 158

c.Otherchangesinthefairvalueofplanassetsandthebenefitobligations(forexample,gainsorlosses)fortheperiodbetweentheearliermeasurementdateandtheendofthefiscalyearthatthemeasurementdateprovisionsareappliedshallberecognizedasothercomprehensiveincomeforthefiscalyearthatthemeasurementdateprovisionsareapplied.

Thatapproachshallbeadjustedif,duringtheperiodbetweentheearliermeasurementdateandthebeginningofthefiscalyearthatthechangeinmeasurementdateoccurs,anemployerelectstoremeasureplanassetsandbenefitobligationsorthereisanevent,suchasasettlementorcurtailment,thatrequiresaninterveningmeasurement.Inthatcase,arevisednetperiodicbenefitcostfortheremainderofthatperiodisdeterminedbyproratingtherevisednetperiodicbenefitcostfortheperiodfromthedateoftheinterveningremeasurementtotheendofthefiscalyearthatthemeasurementdateprovisionsareapplied.Theguidanceinthisparagraphalsoshallapplytoanot-for-profitemployer,exceptthattheadjustmentthatwouldbemadetoretainedearningsshallinsteadberecognizedasachangeinunrestrictednetassetsinthestatementofactivities,netoftax,ifany.Thoseamountsshallbereportedinaseparatelineitemoritemsapartfromexpensesandoutsideaperformanceindicatororotherintermediatemeasureofoperations,ifoneispresented.Theamountsthatwouldberecognizedinothercomprehensiveincomeshallberecognizedpursuanttoparagraph8ofthisStatement.

18(b)-1: Recognition of Plan Settlements and Curtailments Upon Adoption of Statement 158

Question

WhenshouldtheeffectsofsettlementsandcurtailmentsberecognizeduponadoptionofStatement158’smeasurementdateprovisions?

Answer

Paragraphs18and19ofStatement158describetwomethodsoftransitionwithrespecttoacompany’sadoptionofthemeasurementdateprovisionsanddiscusswhentheeffectsofsettlementsandcurtailmentsarerecognizedupontransition.Regardlessofwhichmethodanentityelects,thegainsandlossesfromanysettlementsorcurtailmentsshouldberecognizedinearningsastheyoccur,8beginningwiththeperiodbetweenthemeasurementdatethatisusedfortheimmediatelyprecedingfiscalyear-endandthebeginningofthefiscalyearinwhichthemeasurementdateprovisionsareapplied.Suchsettlementorcurtailmentgainsandlosseswouldnolongerberecognizedonalaggedbasis.

Example BeforetheadoptionofStatement158’smeasurementdateprovisions,acalendar-year-endcompanyusesameasurementdateofSeptember30tomeasurethefundedstatusofitsdefinedbenefitpostretirementplan.ThecompanyadoptsthemeasurementdateprovisionsofStatement158forthe



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fiscalyearendingDecember31,2008.Inthiscase,regardlessofwhichtransitionmethodthecompanyelects,anygainsorlossesrealizedfromsettlementsorcurtailmentsoccurringinthefourthquarterof2007andforwardarenolongerrecognizedonalaggedbasisbutarerecordedinearningsintheperiodthesettlementorcurtailmentoccurs.

19(a)-1: Transition to Fiscal Year-End Measurement Date

Question

Statement158providesfortwomethodsoftransitionwhenacompanyadoptsthemeasurementdateprovisionsinparagraphs18and19.Paragraph19(a)states,inpart:

Netperiodicbenefitcostfortheperiodbetweentheearliermeasurementdateandtheendofthefiscalyearthatthemeasurementdateprovisionsareapplied...shallbeallocatedproportionatelybetweenamountstoberecognizedasanadjustmentofretainedearningsandnetperiodicbenefitcostforthefiscalyearthatthemeasurementdateprovisionsareapplied.

Ifacompanyelectstofollowthetransitionguidanceprovidedinparagraph19whenadoptingthemeasurementdateprovisions,whenistheadjustmenttoretainedearnings(referredtoinparagraph19(a))recorded?Thatis,istheadjustmentrecordedtotheopeningorclosingbalanceofretainedearnings?

Answer

Statement158doesnotprovideexplicitguidanceonwhentheadjustmenttoretainedearningsshouldberecordedwhenacompanyappliesthetransitionguidanceunderparagraph19.However,webelievethatitwouldbeacceptabletomaketheadjustmenttoeithertheopeningorclosingbalanceofretainedearnings(e.g.,asofJanuary1,2008,orasofDecember31,2008,foracalendar-year-endentitythatadoptsthemeasurementdateprovisionsforitsfiscalyearendingafterDecember15,2008—seeparagraph15ofStatement158).

Regardlessofwhethertheadjustmentisrecordedtotheopeningorclosingbalanceofretainedearnings,anentityshouldconsidertheadditionaldisclosurerequiredunderSECStaffAccountingBulletinNo.74,codifiedasSABTopic11.M,“DisclosureoftheImpactThatRecentlyIssuedAccountingStandardsWillHaveontheFinancialStatementsoftheRegistrantWhenAdoptedinaFuturePeriod,”regardingtheknownimpactonretainedearnings.Theentityshouldalsoconsider,amongotherthings,disclosingthepotentialimpactofothersignificantmattersthatitbelievesmightresultfromtheadoptionofthenewstandard(e.g.,technicalviolationsofdebtcovenantagreements,plannedorintendedchangesinbusinesspractices)initsfilingsforperiodspriortotheadoptionofthemeasurementdateprovisions.

Iftheadjustmentismadetotheclosingbalanceofretainedearnings,SAB74disclosureswouldcontinuetoberequiredininterim-periodfilingsduringtheyearofadoptionofthemeasurementdateprovisions(e.g.,during2008foracalendar-year-endentitythatadoptsthemeasurementdateprovisionsforitsfiscalyearendingafterDecember15,2008).


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Appendix C — Authoritative Literature on Pension, Postretirement, and Termination Benefits

ThisappendixincludesacomprehensivelistandselectsummariesofthecurrentU.S.generallyacceptedaccountingprinciplesapplicabletopension,postretirement,andterminationbenefits:

FASBStatementNo.87,Employers’AccountingforPensions

FASBStatementNo.88,Employers’AccountingforSettlementsandCurtailmentsofDefinedBenefitPensionPlansandforTerminationBenefits

FASBStatementNo.106,Employers’AccountingforPostretirementBenefitsOtherThanPensions

FASBStatementNo.132(R),Employers’DisclosuresAboutPensionsandOtherPostretirementBenefits

FASBStatementNo.158,Employers’AccountingforDefinedBenefitPensionPlansandOtherPostretirementPlans—anamendmentofFASBStatementsNo.87,88,106,and132(R)

FASBStaffImplementationGuide,“AGuidetoImplementationofStatement87onEmployers’AccountingforPensions—QuestionsandAnswers”1

FASBStaffImplementationGuide,“AGuidetoImplementationofStatement88onEmployers’AccountingforSettlementsandCurtailmentsofDefinedBenefitPensionPlansandforTerminationBenefits—QuestionsandAnswers”2

FASBStaffImplementationGuide,“AGuidetoImplementationofStatement106onEmployers’AccountingforPostretirementBenefitsOtherThanPensions—QuestionsandAnswers”3

1 This guidance has been amended and incorporated as an appendix to the respective Standard by FASB Staff Position (FSP) No. FAS 158-1, “Conforming Amendments to the Illustrations in FASB Statements No. 87, No. 88, and No. 106 and to the Related Staff Implementation Guides.” The guidance in the FSP is effective as of the effective dates of Statement 158.

2 See footnote 1.3 See footnote 1.

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FASBTechnicalBulletinNo.85-4,AccountingforPurchasesofLifeInsurance

AFFECTS: Entitiesthatownlifeinsurancecontracts.

SUMMARY: Requiresentitiestorecordtheirinvestmentsinlifeinsuranceonthebasisoftheamountthatcouldberealizedundertheinsurancecontractasofthebalancesheetdate.Anychangeincashsurrendervalueorcontractvalueduringtheperiodisreflectedinthecontractexpenseorincomerecognizedfortheperiod.

FASBStaffPosition(FSP)No.FAS106-2,“AccountingandDisclosureRequirementsRelatedtotheMedicarePrescriptionDrug,ImprovementandModernizationActof2003”

AFFECTS: Sponsorsofsingle-employerdefinedbenefitpostretirementhealthcareplansthatprovideprescriptiondrugbenefitsinwhich“(a)theemployerhasconcludedthatprescriptiondrugbenefitsavailableundertheplantosomeorallparticipantsforsomeorallfutureyearsare‘actuariallyequivalent’toMedicarePartDandthusqualifyforthesubsidy”undertheMedicarePrescriptionDrug,Improvement,andModernizationActof2003(the“Act”),and“(b)theexpectedsubsidy[providedbytheAct]willoffsetorreducetheemployer’sshareofthecostoftheunderlyingpostretirementprescriptiondrugcoverageonwhichthesubsidyisbased.”

SUMMARY: InaccordancewithStatement106,measuresoftheaccumulatedpostretirementbenefitobligation(APBO)andnetperiodicpostretirementbenefitcostonorafterthedateofenactmentshouldreflecttheeffectsoftheAct.TheFSPalsoprovidesdisclosureguidancerelatingtotheeffectsofthesubsidywhentheemployerhasnotyetdeterminedactuarialequivalency.

FASBStaffPosition(FSP)No.FAS158-1,“ConformingAmendmentstotheIllustrationsinFASBStatementsNo.87,No.88,andNo.106andtotheRelatedStaffImplementationGuides”

AFFECTS: Entitiesthatsponsorpensionorpostretirementbenefitplans.

SUMMARY: ThisFSPupdatestheillustrationscontainedinStatements87,88,and106toreflecttheprovisionsofStatement158.TheFSPalsoamendsthequestionsandanswerscontainedintheFASBStaffImplementationGuidesforStatements87,88,and106toreflecttheprovisionsofStatement158.ThequestionsandanswershavebeenincorporatedasappendixesintotherespectiveStatements.

EITFIssueNo.86-27,“MeasurementofExcessContributionstoaDefinedContributionPlanorEmployeeStockOwnershipPlan”

AFFECTS: Employerswhoterminateadefinedbenefitplanandcontributetheassetswithdrawntoa“definedcontributionplanoranemployeestockownershipplan(ESOP)andtheamountcontributedisinexcessoftheemployer’srequiredannualcontributiontotheplan.”Theassetsinexcessoftherequiredcontributionaremaintainedinasuspenseaccountpendingallocationtoindividualparticipantaccounts.

Appendix C PostretirementBenefits

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SUMMARY: Ifassetsarecontributedtoadefinedcontributionplan,theemployershould(1)treattheexcesscontributionnotallocatedtoparticipantaccounts“asifitwerepartoftheemployer’sinvestmentportfolioandrecordedasanasset,”(2)recordcompensationexpense“atthetimetheallocationismadebytheplanbasedonthefairmarketvalueoftheassetsatthattime,”and(3)reporttheunallocatedassetsoftheplanthatconsistofemployerstockastreasurystockinitsfinancialstatements.

TheissuanceofAICPAStatementofPosition93-6,Employers’AccountingforEmployeeStockOwnershipPlans,nullifiedtheconsensusesreachedinthisIssuerelatedtocontributionstoanESOP.

EITFIssueNo.88-1,“DeterminationofVestedBenefitObligationforaDefinedBenefitPensionPlan”

AFFECTS: Sponsorsofdefinedbenefitpensionplans(typicallyforeignplans)inwhich“theactuarialpresentvalueofbenefitstowhichanemployeeisentitlediftheemployeeterminatesimmediatelymayexceedtheactuarialpresentvalueofbenefitstowhichtheemployeeisentitledatexpecteddateofseparationbasedonservicetodate.”

SUMMARY: Theemployermaydeterminethevestedbenefitobligationaseither“theactuarialpresentvalueofthevestedbenefitstowhichtheemployeeisentitlediftheemployeeseparatesimmediately...ortheactuarialpresentvalueofthevestedbenefitstothewhichtheemployeeiscurrentlyentitledbutbasedontheemployee’sexpecteddateofseparationorretirement.”

EITFIssueNo.88-23,“Lump-SumPaymentsUnderUnionContracts”

AFFECTS: Employersthatmakelump-sumpaymentstounionemployeesinlieuofalloraportionofanincreaseintheirbasewagerate.

SUMMARY: Theemployermaydeferandamortizealloraportionofalump-sumpayment“onlywhenitisclearthatthepaymentwillbenefitafutureperiodintheformofalowerbasewageratethanotherwisewouldhaveexisted.”Theamortizationperiod“shouldnotextendbeyondthecontractperiod.”

EITFIssueNo.90-3,“AccountingforEmployers’ObligationsforFutureContributionstoaMultiemployerPensionPlan”

AFFECTS: Anemployerwhoentersintoanexistingmultiemployerdefinedbenefitpensionplanorimprovesexistingbenefitsundertheplanandunconditionallypromisestopaycertainfuturecontributionstotheplan.Inaddition,theemployer“executesanagreementthatspecifiestheamountsofthosefuturecontributions.”

SUMMARY: Theemployerisnotrequiredtorecordabenefitliabilitybeyondtheamountofcontributionscurrentlydueandunpaidtotheplan.


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EITFIssueNo.91-7,“AccountingforPensionBenefitsPaidbyEmployersAfterInsuranceCompaniesFailtoProvideAnnuityBenefits”

AFFECTS: Employersthatsettlepensionobligationsthroughthepurchaseofannuitycontractsfrominsurancecompaniesthatareunabletomeettheirobligationsundertheannuitycontractsandtheemployerdecidestomakeupalloraportionofanydeficiencyinannuitypaymentstotheretirees.

SUMMARY: Alossisrecognized,atthetimethedeficiencyisassumed,at“thelesserof(1)anygainrecognizedontheoriginalsettlementor(2)theamountofthebenefitobligationassumedbytheemployer.Theexcessoftheobligationassumedbytheemployeroverthelossrecognizedshouldbeaccountedforasaplanamendmentorplaninitiationinaccordancewithparagraphs24through28ofStatement87.”

EITFIssueNo.92-12,“AccountingforOPEBCostsbyRate-RegulatedEnterprises”

AFFECTS: Rate-regulatedentitiesthatrecordaregulatoryassetfortheStatement106costsforwhichraterecoveryhasbeendeferred.

SUMMARY: Forcontinuingotherpostemploymentbenefit(OPEB)plans,“aregulatoryassetrelatedtoStatement106costsshouldnotberecordediftheregulatorcontinuestoincludeOPEBcostsinratesonapay-as-you-gobasis.”Aregulatoryassetshouldberecognized“forthedifferencebetweentheStatement106costsandtheOPEBcostsincludedintheenterprisesrates”ifcertaincriteriaaremet.

Fordiscontinuedplans,“aregulatoryassetrelatedtoStatement106costsshouldberecordedifitisprobablethatfuturerevenueinanamountatleastequaltoanydeferredStatement106costswillberecoveredinrateswithinapproximately20yearsfollowingtheadoptionofStatement106.”

Ifanenterprisedoesnotinitiallymeetthecriteriatorecognizearegulatoryassetbutmeetsthosecriteriainasubsequentperiod,thenaregulatoryassetrelatedtoStatement106costsshouldberecognizedintheperiodthecriteriaaremet.

EITFIssueNo.92-13,“AccountingforEstimatedPaymentsinConnectionWiththeCoalIndustryRetireeHealthBenefitActof1992”

AFFECTS: EnterprisesthataresubjecttotheCoalIndustryRetireeHealthBenefitActof1992(the“CoalAct”).

SUMMARY: “Enterprisesthatcurrentlyhaveoperationsinthecoalindustryshouldaccountfortheirobligationunderthe[Coal]Acteitherasparticipationinamultiemployerplanoraliabilityimposedbythe[Coal]Act.Enterprisesthatcurrentlyhaveoperationsinthecoalindustrythatdecidetoaccountfortheirobligationasaliabilityandenterprisesthatnolongerhaveoperationsinthecoalindustryshouldaccountfortheirentireobligationunderthe[Coal]ActasalossinaccordancewithStatement5.”Thelossisreportedasanextraordinaryitem.


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EITFIssueNo.93-3,“PlanAssetsUnderFASBStatementNo.106”

AFFECTS: Employersthathaveestablishedtruststofundtheirpostretirementbenefitobligations.

SUMMARY: Itisnotnecessarytodeterminewhetheratrustisbankruptcy-proof(thatis,thetrustassetsareinsulatedfromtheclaimsofgeneralcreditorsinbankruptcy)fortheassetsofthetrusttoqualifyasplanassetsunderStatement106;however,“assetsheldinatrustthatexplicitlyprovidesthatsuchassetsareavailabletothegeneralcreditorsoftheemployerintheeventoftheemployer’sbankruptcywouldnotqualifyasplanassetsunderStatement106.”

EITFIssueNo.96-5,“RecognitionofLiabilitiesforContractualTerminationBenefitsorChangingBenefitPlanAssumptionsinAnticipationofaBusinessCombination”

AFFECTS: Enterprisesthatareconsideringaplantoterminatecertainemployeesifabusinesscombinationisconsummated.

SUMMARY: The“liabilityforthecontractualterminationbenefitsandthecurtailmentlossesundertheemployeebenefitplans...shouldberecognizedwhenthebusinesscombinationisconsummated.”

EITFIssueNo.03-2,“AccountingfortheTransfertotheJapaneseGovernmentoftheSubstitutionalPortionofEmployeePensionFundLiabilities”

AFFECTS: Anemployerthathasanemployees’pensionfund(EPF)planestablishedundertheJapaneseWelfarePensionInsuranceLaw(JWPIL).

SUMMARY: PlansestablishedundertheJWPIL“arecomposedof(a)asubstitutionalportionbasedonthepay-relatedpartoftheold-agepensionbenefitsprescribedbytheJWPIL...and(b)acorporateportionbasedonacontributorydefinedbenefitpensionarrangementestablishedatthediscretionoftheemployer.”Employers/EPFscanseparatethesubstitutionalportionandtransfertheobligationtotheJapanesegovernment.Anemployershouldaccountfortheseparationprocessoncetheentirefour-phaseseparationprocesshasbeencompletedandtheplanassetshavebeentransferredtothegovernment.

EITFIssueNo.03-4,“DeterminingtheClassificationandBenefitAttributionMethodfora‘CashBalance’PensionPlan”

AFFECTS: Entitieswithhybrid(alsoknownascashbalance)pensionplans.

SUMMARY: A“cashbalanceplanshouldbeconsideredadefinedbenefitplanforpurposesofapplyingStatement87.”ThisconsensusislimitedtotheexampleprovidedintheIssuesummaryandconcludesthat“theappropriatecostattributionapproachis...thetraditionalunitcreditmethod....Thedeterminationofwhetheraplanispay-relatedandtheappropriatebenefitattributionapproachfora‘cashbalance’planwithothercharacteristicsorforothertypesofdefinedbenefitpensionplansdependontheevaluationofthespecificfeaturesofthosebenefitarrangements.”


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EITFIssueNo.05-5,“AccountingforEarlyRetirementorPostemploymentProgramsWithSpecificFeatures(SuchasTermsSpecifiedinAltersteilzeitEarlyRetirementArrangements)”

AFFECTS: U.S.companieswithGermansubsidiariesornon-U.S.companiesthatprovidebenefitarrangementsforemployeesunderanAltersteilzeit(ATZ)earlyretirementprogramoranarrangementwiththesameterms.

SUMMARY: SalarypaymentsshouldberecognizedratablyovertheportionoftheATZperiodwhentheemployeeisprovidingactiveservices(the“activeserviceperiod”).Accrualsfortheterminationbenefitwhentheparticipantworksfull-timeforhalfoftheATZperiodandthendoesnotworkfortheremaininghalf,andreceives50percentofhisorhersalaryeachyearduringtheentireATZperiod,shouldbeaccruedratablyfromthedatetheemployeesignstheATZcontracttotheendoftheactiveserviceperiod.Thegovernmentsubsidyshouldberecognizedwhenthecriteriatoreceiveithavebeenmet.

EITFIssueNo.06-4,“AccountingforDeferredCompensationandPostretirementBenefitAspectsofEndorsementSplit-DollarLifeInsuranceArrangements”

AFFECTS: Entitieswithendorsementsplit-dollarlifeinsurancearrangementsthatprovideaspecifiedbenefittoanemployeethatisnotlimitedtotheemployee’sactiveserviceperiod.Thus,theaccountingforcertaincompany-ownedlifeinsuranceorbank-ownedlifeinsurancepolicieswouldbeaffected.

SUMMARY: Anemployershouldrecognizealiabilityforfuturebenefitsonthebasisofthesubstantiveagreement(oftenanagreementtokeepaninsurancepolicyinforceduringtheperiodafterretirement)withtheemployee,sincethepostretirementbenefitobligationisnoteffectivelysettledthroughthepurchaseoftheendorsementsplit-dollarlifeinsurancepolicy.

EITFIssueNo.06-5,“AccountingforPurchasesofLifeInsurance—DeterminingtheAmountThatCouldBeRealizedinAccordanceWithFASBTechnicalBulletinNo.85-4,AccountingforPurchasesofLifeInsurance”

AFFECTS: Entitieswithlifeinsurancepolicies,includingcompany-ownedlifeinsuranceorbank-ownedlifeinsurance.

SUMMARY: Theamountthatcouldberealizedunderaninsurancecontractshould(1)bedeterminedbyconsideringanyadditionalamounts(beyondcashsurrendervalue)includedinthecontractualtermsofthepolicyand(2)bebasedonassumedsurrenderattheindividualpolicyorcertificatelevel,unlessallpoliciesorcertificatesarerequiredtobesurrenderedasagroup.Fixedamountsrecoverableinfutureperiodsinexcessofoneyearshouldberecordedattheirpresentvalues.

EITFIssueNo.06-10,“AccountingforCollateralAssignmentSplit-DollarLifeInsuranceArrangements”

AFFECTS: Entitiesparticipatingincollateralassignmentsplit-dollarlifeinsurancearrangementsthatprovideanemployeebenefitextendingintoanemployee’spostretirementperiod.


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SUMMARY: Aliabilityshouldberecognized“forthepostretirementbenefitrelatedtoacollateralassignmentarrangementinaccordancewitheitherStatement106(if,insubstance,apostretirementplanexists)orOpinion12”(ifnotpartofaplan)if,basedonthesubstantiveagreementwiththeemployee,theemployerhasagreedtomaintainalifeinsurancepolicyduringthepostretirementperiodorprovideadeathbenefit.Anentityshouldmeasureandrecognizetheassociatedassetonthebasisofthetermsofthecollateralassignmentarrangement.

EITFTopicNo.D-27,“AccountingfortheTransferofExcessPensionAssetstoaRetireeHealthCareBenefitsAccount”

AFFECTS: Employersthattransferexcesspensionassetsofadefinedbenefitplan(otherthanamultiemployerplan)toahealthcarebenefitsaccount.

SUMMARY: Anytransferofexcesspensionassetstoaretireehealthcarebenefitsaccountisanegativecontributiontothepensionplanandapositivecontributiontotheretireehealthbenefitsaccount.Theassociatedtransferdoesnotresultinagainorloss.

EITFTopicNo.D-36,“SelectionofDiscountRatesUsedforMeasuringDefinedBenefitPensionObligationsandObligationsofPostretirementBenefitPlansOtherThanPensions”

AFFECTS: EmployerswithdefinedbenefitplansaccountedforunderStatement87.

SUMMARY: Paragraph44AofStatement87(asamendedbyStatement158)providesguidanceonselectingdiscountratestomeasuredefinedbenefitpensionobligations.4

4 Paragraph 31A of Statement 106 (as amended by Statement 158) provides similar guidance for selecting discount rates to measure postretirement benefit obligations.


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Appendix D — Statement 158 Implementation GuidanceThefollowingimplementationguidanceisreprintedfromparagraphsA1throughA31ofAppendixAofStatement158.

Introduction

A1. ThisappendixisanintegralpartofthisStatement.ItprovidesguidanceillustratingthetransitionprovisionsofthisStatementinsimplifiedsituations.Applyingthoseprovisionstoactualsituationswillrequirejudgment;thisappendixisintendedtoaidinmakingthosejudgments.Certainassumptions,includingbenefitpayments,employercontributions,andobligationssettled,havenotbeenincludedbecausethosetransactionsarenotaffectedbytheprovisionsofthisStatement.Therefore,theexamplesdonotincludealltheassumptionsnecessarytoreconcilebetweenvariousstatedassumptionsorthebeginningandendingbalancesofplanassetsorbenefitobligations.Examples1and2provideimplementationguidanceforabusinessentitythatsponsorsadefinedbenefitpostretirementplan.Example3providesguidanceforanot-for-profitorganizationthatsponsorsadefinedbenefitpostretirementplan.[Editor’sNote:Example3hasbeenexcludedfromthisappendix.]

Example 1 — Application of the Recognition Provisions of This Statement

A2. CompanyAadoptstherecognitionanddisclosurerequirementsofthisStatementasoftheendofitsfiscalyear(December31,2006).Forsimplicity,thisexampleassumesthatCompanyA’sannualreportincludesastatementoffinancialpositionandastatementofchangesinstockholders’equity.AnincomestatementisnotpresentedinthisexamplebecauseitisnotaffectedbytherecognitionprovisionsofthisStatement.Additionally,thisexampledoesnotconsidertheeffectsonfinancialreportingforinterimperiods.InapplyingtherecognitionprovisionsofthisStatementfortransition,CompanyAadjuststheamountsrecognizedinthestatementoffinancialpositionasofDecember31,2006,priortoapplicationofthisStatement,sothatgainsorlosses,priorservicecostsorcredits,andthetransitionassetorobligationthathavenotyetbeenincludedinnetperiodicbenefitcostasofDecember31,2006,arerecognizedasacomponentoftheendingbalanceofaccumulatedothercomprehensiveincome,netoftax(illustratedinparagraphA4).Theadjustmentisreportedasanadjustmentoftheendingbalanceofaccumulatedothercomprehensiveincome(seeparagraphA7).

A3. ThefundedstatusofCompanyA’sdefinedbenefitpensionplanandtheamountsnotyetrecognizedascomponentsofnetperiodicpensioncostasofDecember31,2006,andDecember31,2007,areshownbelow.CompanyAmeasuresplanassetsandbenefitobligationsasofthedateofitsfinancialstatements.UnderthepriorprovisionsofFASBStatementNo.87,Employers’AccountingforPensions,CompanyAdidnothaveanadditionalminimumpensionliabilityatDecember31,2006.

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CompanyAisnotrequiredtoamortizethecumulativenetlossbecauseitislessthan10percentofthegreateroftheprojectedbenefitobligationorthemarket-relatedvalueofplanassetsforallyearspresented.NoplanamendmentsaffecttheperiodfromJanuary1,2006,toDecember31,2007.CompanyA’sapplicabletaxratefor2006and2007is40percent.AlldeferredtaxassetsrecognizedareevaluatedbyCompanyA,andnovaluationallowanceisconsiderednecessaryatanytime.UnderthepriorprovisionsofStatement87,CompanyAhadarecognizedliabilityof$45,000atDecember31,2006,fortheamountthatpastnetperiodicpensioncostsexceededpastcontributionstotheplan.

12/31/06 12/31/07

(in thousands)

Projectedbenefitobligation $(2,525) $(2,700)

Planassetsatfairvalue 1,625 1,700

Fundedstatus $(900) $(1,000)

Itemsnotyetrecognizedasacomponentofnetperiodicpensioncost:

Transitionobligation $240 $200

Priorservicecost 375 350

Netloss 240 260

$855 $810

A4. AtDecember31,2006,CompanyArecognizesaliabilityfortheunderfundedstatusofitsdefinedbenefitpensionplanandadjustsendingaccumulatedothercomprehensiveincome,netoftax,forthetransitionobligation,priorservicecost,andnetlossthathavenotbeenrecognizedasacomponentofnetperiodicpensioncost.Thejournalentryisshownbelow:

Accumulatedothercomprehensiveincome 855

Deferredtaxasset 342

Deferredtaxbenefit—accumulatedothercomprehensiveincome

342

Liabilityforpensionbenefits 855

A5. ThefollowingtableillustratestheadjustmentsmadetoCompanyA’sstatementoffinancialpositionforDecember31,2006.ThetableisnotintendedtoillustratethedisclosurerequirementsofthisStatement(seeparagraphA6).Thisillustrationassumesthatplanassetsexceedtheactuarialpresentvalueofbenefitstobepaidoverthenextfiscalyear.Therefore,theentireliabilityforpensionbenefitsisclassifiedasalong-termliability.

Appendix D PostretirementBenefits

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Company A Statement of Financial Position

December 31, 2006 (in thousands)

Before Application of Statement 158 Adjustments

After Application of Statement 158

Currentassets

Cash $40,000 $0 $40,000

Inventory 720,500 0 720,500

Totalcurrentassets 760,500 0 760,500

Intangibleassets 100,000 0 100,000

Totalassets $860,500 $0 $860,500

Currentliabilities $60,000 $0 $60,000

Liabilityforpensionbenefits 45 855 900

Otherlong-termliabilities 99,955 0 99,955

Deferredincometaxes 20,000 (342) 19,658

Totalliabilities 180,000 513 180,513

Commonstock 150,000 0 150,000

Paid-incapital 300,000 0 300,000

Retainedearnings 205,500 0 205,500

Accumulatedothercomprehensiveincome 25,000 (513) 24,487

Totalstockholders’equity 680,500 (513) 679,987

Totalliabilitiesandstockholders’equity $860,500 $0 $860,500

A6. Thefollowingtableillustratesthedisclosuresrequiredbyparagraph20ofthisStatementintheyearthattherecognitionprovisionsareinitiallyadopted.


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Incremental Effect of Applying FASB Statement No. 158 on Individual Line Items in the Statement of Financial Position

December 31, 2006 (in thousands)

Before Application of Statement 158 Adjustments

After Application of Statement 158

Liabilityforpensionbenefits $45 $855 $900

Deferredincometaxes 20,000 (342) 19,658

Totalliabilities 180,000 513 180,513

Accumulatedothercomprehensiveincome 25,000 (513) 24,487

Totalstockholders’equity 680,500 (513) 679,987

A7. CompanyA’sstatementofchangesinstockholders’equityfortheyearendedDecember31,2006,whichincludestheeffectsofapplyingtheprovisionsofthisStatement,follows.Bracketsareusedtohighlightthoseeffects.ThetableisnotintendedtoillustratethedisclosurerequirementsofthisStatement.

Company AStatement of Changes in Stockholders’ Equity

Year Ended December 31, 2006 (in thousands)

TotalComprehensive

IncomeRetained Earnings

Accumulated Other

Comprehensive Income

Common Stock

Paid-in Capital

BalanceatDecember31,2005 $612,979 $137,988 $24,991 $150,000 $300,000

ComprehensiveincomeNetincomefor2006 67,512 $67,512 67,512

Othercomprehensiveincome,netoftaxForeigncurrencytranslationgain 15 15

Unrealizedholdlossarisingduringperiod (6) (6)

Othercomprehensiveincome 9 9

Comprehensiveincome $67,521

AdjustmenttoinitiallyapplyFASBStatementNo.158,netoftax [(513)] [(513)]

BalanceatDecember31,2006 $679,987 $205,500 $24,487 $150,000 $300,000


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A8. InapplyingthisStatementin2007,CompanyA:

a.Adjustsothercomprehensiveincome,netoftax,torecognizetheamortizationofthetransitionobligationinnetperiodicpensioncost

b.Adjustsothercomprehensiveincome,netoftax,torecognizetheamortizationofpriorservicecostinnetperiodicpensioncost

c.Recognizesapensionliabilityfortheadditionalnetlossarisingduringtheyear,andacorrespondingdecreaseinothercomprehensiveincome,netoftax

d.Recognizesapensionliabilityandnetperiodicpensioncost,netoftax,fortheservicecost,interestcost,andexpectedreturnonplanassets.

A9. ThecomponentsofprojectednetperiodicpensioncostfortheyearendedDecember31,2007,are:

Servicecost $120

Interestcost 95

Expectedreturnonplanassets (80)

Amortizationofpriorservicecost 25

Amortizationofthetransitionobligation 40

Amortizationofnet(gain)loss 0

Netperiodicbenefitcost $200

A10. FortheyearendingDecember31,2007,CompanyAmakesthefollowingjournalentriesinapplyingtherecognitionprovisionsofthisStatement:

a.Recognizenetperiodicpensioncostandacorrespondingincreaseinothercomprehensiveincome,netoftax,foramortizationofthetransitionobligation(seeparagraphA9):

Netperiodicpensioncost 40

Deferredtaxbenefit—othercomprehensiveincome 16

Deferredtaxbenefit—netincome 16

Othercomprehensiveincome 40

b.Recognizenetperiodicpensioncostandacorrespondingincreaseinothercomprehensiveincome,netoftax,foramortizationofpriorservicecost(seeparagraphA9):






86 Deloitte

c.Recognizeapensionliabilityandnetperiodicpensioncost,netoftax,fortheservicecostof$120,interestcostof$95,andtheexpectedreturnonplanassetsof$(80)(seeparagraphA9):


Deferredtaxasset 54



d.Recognizeapensionliabilityfortheadditionalnetlossarisingduringtheyearandacorrespondingdecreaseinothercomprehensiveincome,netoftax(thisistheincreaseinnetlossfrom$240to$260showninparagraphA3):


Deferredtaxasset 8



Example 2(a) — Change in the Measurement Date and Plan Settlement

A11. CompanyBadoptedtherecognitionprovisionsofthisStatementinitsDecember31,2006financialstatements.AsrequiredbythisStatement,CompanyBchangesthemeasurementdateforitsdefinedbenefitpensionplanfromSeptember30toDecember31forits2008financialstatements.CompanyBelectstoimplementthatchangebyremeasuringplanassetsandobligationsasofDecember31,2007(seeparagraph18).CompanyBhasaplansettlementonNovember30,2007,andremeasuresitsplanassetsandbenefitobligationsasofNovember30,2007,resultinginasettlementlossbeforetaxesof$60,000,whichisaportionofthenetlossinaccumulatedothercomprehensiveincome.However,theeffectsofremeasuringplanassetsandobligationsasofNovember30,2007,onthefundedstatusreportedinCompanyB’sstatementoffinancialpositionarenotrecognizeduntilthefollowingfiscalyearbecausethechangeinmeasurementdatehasnotbeenadoptedatNovember30,2007.Inrecognizingtheeffectsoftheplansettlementandchangeinmeasurementdate,CompanyB:

a.Recognizesthesettlementlossinnetincomeinthefourthquarterof2007andacorrespondingdecreaseinthecumulativenetlossinothercomprehensiveincome(illustratedinparagraphA14)

b.RecognizesthenetperiodicpensioncostincurredfromOctober1,2007,toDecember31,2007,netoftax,asanadjustmenttobeginningretainedearningsandbeginningaccumulatedothercomprehensiveincomefor2008(illustratedinparagraphA15(a))

c.RecognizesanygainsorlossesarisingduringtheperiodfromOctober1,2007,toDecember31,2007,netoftax,asanadjustmenttobeginningaccumulatedothercomprehensiveincomefor2008(illustratedinparagraphA15(b))


Deloitte 87


d.Recognizescorrespondingchangesinitspensionliabilityanddeferredtaxaccountsfortheaboveitems.

A12. ThefundedstatusesofCompanyB’splanasofSeptember30,2007,November30,2007,December31,2007,andDecember31,2008,andamountsincludedinaccumulatedothercomprehensiveincometoberecognizedasacomponentofnetperiodicpensioncostareshownbelow.CompanyBhasnoremainingtransitionassetorobligation.CompanyBisnotrequiredtoamortizethecumulativenetlossbecauseitislessthan10percentofthegreaterofthemarket-relatedvalueofplanassetsortheprojectedbenefitobligationforallyearspresented.CompanyB’sapplicabletaxratefor2007and2008is40percent.AlldeferredtaxassetsrecognizedareevaluatedbyCompanyB,andnovaluationallowanceisconsiderednecessaryatanytime.

9/30/07 11/30/07 12/31/07 12/31/08

(in thousands)

Projectedbenefitobligation $(3,660) $(3,200) $(3,210) $(3,700)

Planassetsatfairvalue 2,600 2,200 2,225 2,200

Fundedstatus $(1,060) $(1,000) $(985) $(1,500)


Priorservicecost $380 $360 $350 $230

Netloss 265 220 315 365

$645 $580 $665 $595

A13. BasedonactuarialvaluationsperformedasofSeptember30,2007,andNovember30,2007,CompanyBdeterminesitsnetperiodicpensioncostforthetwo-monthperiodfromOctober1,2007,toNovember30,2007,andfortheone-monthperiodfromDecember1,2007,toDecember31,2007,respectively,tobe:

Net Periodic Pension Cost for: 2 Months 1 Month Total

Servicecost $25 $15 $40

Interestcost 30 15 45

Expectedreturnonplanassets (30) (15) (45)

Totalservicecost,interestcost,andexpectedreturnonplanassets 25 15 40

Amortizationofpriorservicecost 20 10 30

Amortizationofnetloss 0 0 0

Totalamortization 20 10 30

Netperiodicbenefitcost $45 $25 $70

88 Deloitte

A14. Inthefourthquarterof2007,CompanyBmakesthefollowingjournalentrytorecognizethesettlementloss:

Netperiodicpensioncost(settlementloss) 60




A15. In2008,CompanyBmakesthefollowingjournalentriesinapplyingthemeasurementdateprovisionsofthisStatement:

a.Adjustthebeginningbalancesofretainedearnings,accumulatedothercomprehensiveincome,pensionliability,anddeferredtaxaccountsfortheamortizationofpriorservicecostandtheservicecost,interestcost,andexpectedreturnonplanassets(seeparagraphA13):

Retainedearnings 70

Deferredtaxasset($40×40%) 16

Deferredtaxbenefit—accumulatedothercomprehensiveincome($30×40%)

12

Deferredtaxbenefit—retainedearnings($70×40%) 28



b.Adjustthebeginningbalancesofaccumulatedothercomprehensiveincome,pensionliability,anddeferredtaxaccountsforthenetlossarisingduringtheperiod:

Accumulatedothercomprehensiveincome 110a

Deferredtaxasset 44

Deferredtaxbenefit—accumulatedothercomprehensiveincome

44


A16. CompanyB’sstatementofchangesinstockholders’equityfor2007and2008,whichshowstheeffectsofthesettlementlossandchangeinmeasurementdate,follows.Bracketsareusedtohighlightthoseeffects.ThetableisnotintendedtoillustratethedisclosurerequirementsofthisStatement.

a This is the net change in the cumulative net loss after recognition of the settlement loss, calculated as follows: Net loss at 12/31/07 of $315 – Net loss at 9/30/07 of $265 + Plan settlement loss of $60 = $110.


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b Includes the settlement loss of $60 ($36, net of tax).


Company B Statement of Changes in Stockholders’ Equity

Year Ended December 31, 2007, and 2008 (in thousands)

TotalComprehensive


Accumulated Other


Common Stock

Paid-in Capital

BalanceatDecember31,2006 $289,140 $55,000 $(360) $195,000 $39,500

Comprehensiveincome

Netincomefor2007 5,464 [$5,464b] 5,464

Othercomprehensiveincome,netoftax

Settlementloss(seeparagraphA14) [36] [36]


Netloss (99) (99)



BalanceatDecember31,2007 294,613 60,464 (351) 195,000 39,500

EffectsofchangingpensionplanmeasurementdatepursuanttoFASBStatementNo.158

Servicecost,interestcost,andexpectedreturnonplanassetsforOctober1–December31,netoftax(seeparagraphA15(a)) [(24)] [(24)]

AmortizationofpriorservicecostforOctober1–December31,netoftax(seeparagraphA15(a)) 0 [(18)] [18]

AdditionallossforOctober1–December31,netoftax(seeparagraphA15(b)) [(66)] [(66)]

Beginningbalance,asadjusted 294,523 60,422 (399) 195,000 39,500

Comprehensiveincome

Netincomefor2008 12,000 $12,000 12,000



Netloss (30) (30)




90 Deloitte

Example 2(b) — Change in the Measurement Date (Alternative Method)

A17. CompanyCadoptedtherecognitionprovisionsofthisStatementinitsDecember31,2006financialstatements.AsrequiredbythisStatement,CompanyCchangesthemeasurementdateforitsdefinedbenefitpensionplanfromSeptember30toDecember31forits2008financialstatements.CompanyCelectsthealternativetransitionmethod(seeparagraph19).BasedonthemeasurementofplanassetsandbenefitobligationsasofSeptember30,2007,CompanyC’sactuarypreparesa15-monthprojectionofnetperiodicpensioncosttoDecember31,2008.Inrecognizingtheeffectsofthechangeinmeasurementdateforits2008financialstatements,CompanyC:

a.Allocatesthenetperiodicpensioncostforthe15-monthperiodfromOctober1,2007,toDecember31,2008,netoftax,proportionatelybetweenamountstoberecognizedasanadjustmentofretainedearningsandnetperiodicpensioncostfor2008(illustratedinparagraphsA19,A20(a),andA20(b))

b.RecognizesanynetgainorlossarisingduringtheperiodfromOctober1,2007,toDecember31,2008,netoftax,inothercomprehensiveincomefor2008(illustratedinparagraphA21)

c.Recognizescorrespondingchangesinitspensionliabilityanddeferredtaxaccountsfortheaboveitems.

A18. ThefundedstatusesofCompanyC’splanasofSeptember30,2007,andDecember31,2008,andamountsincludedinaccumulatedothercomprehensiveincometoberecognizedascomponentsofnetperiodicpensioncostareshownbelow.CompanyChasnoremainingtransitionassetorobligation.CompanyCisnotrequiredtoamortizethecumulativenetlossbecauseitislessthan10percentofthegreaterofthemarket-relatedvalueofplanassetsortheprojectedbenefitobligationforallyearspresented.CompanyC’sapplicabletaxratefor2007and2008is40percent.AlldeferredtaxassetsrecognizedareevaluatedbyCompanyC,andnovaluationallowanceisconsiderednecessaryatanytime.

9/30/07 12/31/08

(in thousands)

Projectedbenefitobligation $(3,200) $(3,500)

Planassetsatfairvalue 2,200 2,330

Fundedstatus $(1,000) $(1,170)


Priorservicecost $400 $275

Netloss 265 315

$665 $590


Deloitte 91

A19. BasedonanactuarialvaluationperformedasofSeptember30,2007,CompanyCdeterminesitsnetperiodicpensioncostforthe15-monthperiodfromOctober1,2007,toDecember31,2008,andallocatesitsnetperiodicpensioncostproportionatelybetweenamountstoberecognizedasanadjustmentofretainedearningsandnetperiodicpensioncostfor2008asfollows:

Net Periodic Pension Cost for: 15 Months 3 Months 12 Months

Servicecost $130

Interestcost 150


Totalservicecost,interestcost,andexpectedreturnonplanassets 175 $35 $140


Amortizationofnetloss 0


Netperiodicpensioncost $300 $60 $240

A20. In2008,CompanyCmakesthefollowingjournalentriesinapplyingthemeasurementdateprovisionsofthisStatement:

a.Adjustretainedearnings,accumulatedothercomprehensiveincome,pensionliability,anddeferredtaxaccountsforthree-fifteenthsofthenetperiodicpensioncostprojectedforthe15-monthperiodfromOctober1,2007,toDecember31,2008(seeparagraphA19):

Retainedearnings 60

Deferredtaxassets($35×40%) 14

Deferredtaxbenefit—accumulatedothercomprehensiveincome($25×40%) 10





92 Deloitte

b.Recognizenetperiodicpensioncostfortwelve-fifteenthsofthenetperiodicpensioncostprojectedforthe15-monthperiodfromOctober1,2007,toDecember31,2008,andmakecorrespondingchangestothepensionliabilityanddeferredtaxaccounts(seeparagraphA19):



Deferredtaxbenefit—othercomprehensiveincome($100×40%) 40

Deferredtaxbenefit—netincome($240×40%) 96



A21. In2008,CompanyCadjustsothercomprehensiveincomeandpensionliabilityfortheentirenetlossarisingduringtheperiodfromOctober1,2007,toDecember31,2008,becausenetgainsorlossescannotbereadilyidentifiableasarisingincertainperiods.Thejournalentryisasfollows:

Othercomprehensiveincome 50a

Deferredtaxassets 20



A22. CompanyC’sstatementofchangesinstockholders’equityfor2007and2008,whichshowstheeffectsofthechangeinmeasurementdate,follows.Bracketsareusedtohighlightthoseeffects.ThetableisnotintendedtoillustratethedisclosurerequirementsofthisStatement.

a This is the net change in the cumulative net loss, calculated as follows: Net loss at 12/31/07 of $315 – Net loss at 9/30/07 of $265 = $50.


Deloitte 93

b Includes the net periodic pension cost of $240 ($144, net of tax).

Company C Statement of Changes in Stockholders’ Equity

Years Ended December 31, 2007, and 2008 (in thousands)

Total Comprehensive


Accumulated Other


Common Stock

Paid-in Capital


Comprehensiveincome

Netincomefor2007 10,500 $10,500 10,500



Netloss (39) (39)




Comprehensiveincome

Netincomefor2008(seeparagraphA20(b)) 11,856 [$11,856b] 11,856


Priorservicecost(seeparagraphA20(b)) [60] [60]

Netloss(seeparagraphA21) [(30)] [(30)]



EffectsofchangingthepensionplanmeasurementdatepursuanttoFASBStatementNo.158

Servicecost,interestcost,andexpectedreturnonplanassetsforOctober1–December31,2007,netoftax(seeparagraphA20(a)) [(21)] [(21)]

AmortizationofpriorservicecostforOctober1–December31,2007,netoftax(seeparagraphA20(a)) 0 [(15)] [15]

(21) (36) 15



94 Deloitte

Example 2(c) — Change in the Measurement Date (Alternative Method) and Plan Settlement

A23. CompanyDadoptedtherecognitionprovisionsofthisStatementinitsDecember31,2006financialstatements.AsrequiredbythisStatement,CompanyDchangesthemeasurementdateforitsdefinedbenefitpensionplanfromSeptember30toDecember31forits2008financialstatements.CompanyDelectsthealternativetransitionmethod(seeparagraph19).AsofSeptember30,2007,CompanyD’sactuarypreparesa15-monthprojectionofnetperiodicpensioncosttoDecember31,2008.CompanyDhasaplansettlementonNovember30,2007,resultinginnewmeasurementsofplanassetsandobligationsandrecognitionofalossbeforetaxesof$90,000,whichisaportionofthenetlossinaccumulatedothercomprehensiveincome.Asaresultoftheplansettlement,theactuarypreparesanewprojectionofnetperiodicpensioncostforthe13monthstoDecember31,2008.Pursuanttoparagraph19,thelossfromtheplansettlementisrecognizedinthelastquarterof2007.However,theeffectsofremeasuringplanassetsandobligationsasofNovember30,2007,onthefundedstatusreportedinCompanyD’sstatementoffinancialpositionarenotrecognizeduntilthefollowingfiscalyearbecausethechangeinmeasurementdatehasnotbeenadoptedatNovember30,2007.Inrecognizingtheeffectsoftheplansettlementandchangeinmeasurementdate,CompanyD:

a.Recognizesthesettlementlossinnetincomeinthefourthquarterof2007andacorrespondingdecreaseinthecumulativenetlossinothercomprehensiveincome(illustratedinparagraphA25)

b.DeterminesthenetperiodicpensioncostfortheperiodbetweenSeptember30,2007,andDecember31,2007,netoftax,toberecognizedin2008asanadjustmentofretainedearningsbyproportionatelyallocatingprojectionsofnetperiodicpensioncostfor15monthsand13monthsmadeasofSeptember30,2007,andNovember30,2007,respectively(illustratedinparagraphsA27,A28(a),andA28(c))

c.RecognizesanynetgainorlossarisingduringtheperiodfromOctober1,2007,toNovember30,2007,netoftax,asanadjustmentofaccumulatedothercomprehensiveincomeandrecognizesanynetgainorlossarisingduringtheperiodfromDecember1,2007,toDecember31,2008,netoftax,asanadjustmentofothercomprehensiveincomefor2008(illustratedinparagraphsA28(b)andA29)

d.Recognizescorrespondingchangesinitspensionliabilityanddeferredtaxaccountsfortheaboveitems.

A24. ThefundedstatusesofCompanyD’splanasofSeptember30,2007,November30,2007,andDecember31,2008,andamountspreviouslyincludedinaccumulatedothercomprehensiveincomethataretoberecognizedasacomponentofnetperiodicpensioncostareshownbelow.CompanyDhasnoremainingtransitionassetorobligation.CompanyDisnotrequiredtoamortizethecumulativenetlossbecauseitislessthan10percentofthegreaterofthemarket-relatedvalueofplanassetsortheprojectedbenefitobligationforallyearspresented.CompanyD’sapplicabletaxratefor2007and2008is40percent.AlldeferredtaxassetsrecognizedareevaluatedbyCompanyD,andnovaluationallowanceisconsiderednecessaryatanytime.


Deloitte 95

9/30/07 11/30/07 12/31/08

(in thousands)

Projectedbenefitobligation $(3,550) $(3,600) $(3,610)

Planassetsatfairvalue 2,500 2,525 2,510

Fundedstatus $(1,050) $(1,075) $(1,100)


Priorservicecost $400 $380 $250

Netloss 200 250 300

$600 $630 $550

A25. Inthefourthquarterof2007,CompanyDmakesthefollowingjournalentrytorecognizethesettlementloss:

Netperiodicpensioncost(settlementloss) 90




A26. BasedonactuarialvaluationsperformedasofSeptember30,2007,andNovember30,2007,CompanyDdeterminesitsnetperiodicpensioncostforthe2-monthperiodfromOctober1,2007,toNovember30,2007,and13-monthperiodfromDecember1,2007,toDecember31,2008,respectively,tobe:

Net Periodic Pension Cost for: 2 Months 13 Months

Servicecost $17 $110

Interestcost 20 140

Expectedreturnonplanassets (14) (100)

Totalservicecost,interestcost,andexpectedreturnonplanassets 23 150

Amortizationofpriorservicecost 20 130

Amortizationofnet(gain)loss 0 0

Totalamortization 20 130

Netperiodicpensioncost $43 $280


96 Deloitte

A27. CompanyDallocatesitsnetperiodicpensioncostproportionatelybetweentheamountstoberecognizedasanadjustmentofretainedearningsandnetperiodicpensioncostfor2008asfollows:

Adjustment to Retained Earnings: 2 Months

13 Months (above) ×

(1/13) Total

Servicecost $17 $8 $25

Interestcost 20 11 31

Expectedreturnonplanassets (14) (7) (21)

Totalservicecost,interestcost,andexpectedreturnonplanassets 23 12 35

Amortizationofpriorservicecost 20 10 30

Amortizationofnet(gain)loss 0 0 0


Netperiodicpensioncost $43 $22 $65

Adjustment to Net Periodic Pension Cost:

13 Months (above) ×

(12/13)

Servicecost $101

Interestcost 129


Totalservicecost,interestcost,andexpectedreturnonplanassets 138


Amortizationofnet(gain)loss 0

Totalamortization 120

Netperiodicpensioncost $258

A28. In2008,CompanyDmakesthefollowingjournalentriesinapplyingthemeasurementdateprovisionsofthisStatement:

a.Adjustretainedearnings,accumulatedothercomprehensiveincome,pensionliability,anddeferredtaxaccountsforthenetperiodicpensioncostforthe2-monthperiodfromOctober1,2007,toNovember30,2007,andone-thirteenthofthenetperiodicpensioncostprojectedforthe13-monthperiodfromDecember1,2007,toDecember31,2008(seeparagraphA27):


Deloitte 97

Retainedearnings 65


Deferredtaxbenefit—accumulatedothercomprehensiveincome($30×40%) 12




b.Adjustaccumulatedothercomprehensiveincome,pensionliability,anddeferredtaxaccountsforthenetlossarisingduringthetwo-monthperiodfromOctober1,2007,toNovember30,2007:

Accumulatedothercomprehensiveincome 140a

Deferredtaxassets 56

Deferredtaxbenefit—accumulatedothercomprehensiveincome 56


c.Recognizenetperiodicpensioncost,pensionliability,anddeferredtaxassetsfortwelve-thirteenthsofthenetperiodicpensioncostprojectedforthe13-monthperiodfromDecember1,2007,toDecember31,2008(seeparagraphA27):



Deferredtaxbenefit—othercomprehensiveincome($120×40%) 48

Deferredtaxbenefit—netincome($258×40%) 103



A29. In2008,CompanyDadjustsothercomprehensiveincomeandpensionliabilityfortheentirenetlossarisingduringtheperiodfromDecember1,2007,toDecember31,2008,becausenetgainsandlossescannotbereadilyidentifiableasarisingincertainperiods.Thejournalentryisasfollows:

Othercomprehensiveincome 50b

Deferredtaxasset 20



a This is the net change in the cumulative net loss after recognition of the settlement loss, calculated as follows: Net loss at 11/30/07 of $250 – Net loss at 9/30/07 of $200 + Plan settlement loss of $90 = $140.

b This is the net change in the cumulative net loss, calculated as follows: Net loss at 12/31/08 of $300 – Net loss at 11/30/07 of $250 = $50.


98 Deloitte

Company D Statement of Changes in Stockholders’ Equity

Years Ended December 31, 2007, and 2008 (in thousands)

TotalComprehensive


Accumulated Other


Common Stock

Paid-in Capital


Comprehensiveincome

Netincomefor2007 20,446 [$20,446c] 20,446


Settlementloss(seeparagraphA25) [54] [54]


Netloss (60) (60)



c Includes the settlement loss of $90 ($54, net of tax).

A30. ThefollowingisCompanyD’sstatementofchangesinstockholders’equityfor2007and2008thatshowstheeffectsofthechangeinmeasurementdate.Bracketsareusedtohighlightthoseeffects.ThetableisnotintendedtoillustratethedisclosurerequirementsofthisStatement.

(Continuedonnextpage)


Deloitte 99

TotalComprehensive


Accumulated Other


Common Stock

Paid-in Capital


Comprehensiveincome

Netincomefor2008(seeparagraphA28(c)) 11,845 [$11,845d] 11,845



Netloss(seeparagraphA29) [(30)] [(30)]



EffectsofaccountingchangeregardingpensionplanmeasurementdatepursuanttoFASBStatementNo.158

Servicecost,interestcost,andexpectedreturnonplanassetsforOctober1–December31,2007,netoftax(seeparagraphA28(a)) [(21)] [(21)]

AdditionalnetlossforOctober1–November30,2007(seeparagraphA28(b)) [(84)] [(84)]

AmortizationofpriorservicecostforOctober1–December31,2007,netoftax(seeparagraphA28(a)) 0 [(18)] [18]

(105) (39) (66)



(Continuedfrompreviouspage)

d Includes the net periodic pension cost of $258 ($155, net of tax).

100 Deloitte

A31. IfCompanyDissuesfinancialinformationaboutitsfinancialpositionasofadatein2008butpriortoDecember31,2008,theeffectsofremeasuringplanassetsandobligationsasofNovember30,2007,onthefundedstatusreportedinCompanyD’sstatementoffinancialpositionwouldberecognizedpriortoissuingthatinformationasfollows:

a.Adjustothercomprehensiveincomeforamortizationofpriorservicecost:

Retainedearnings 20


Deferredtaxbenefit—retainedearnings 8


b.Recognizetheadditionallossinothercomprehensiveincome:


Deferredtaxasset 56




Deloitte 101

Appendix E — Sample Disclosures Under Statement 132(R) (as Amended by Statement 158)ThematerialbelowisreprintedfromAppendixCofStatement132(R)(asamendedbyStatement158).

C1. Thisappendixillustratesthefollowingpensionandotherpostretirementbenefitdisclosures:

a.Illustration1—DisclosuresaboutPensionandOtherPostretirementBenefitPlansintheAnnualFinancialStatementsofaPubliclyTradedEntity

b.Illustration2—Interim-PeriodDisclosuresofaPubliclyTradedEntity

c.Illustration3—Interim-PeriodDisclosuresofaNonpublicEntityinaCompleteSetofFinancialStatements.

Thefinancialstatementsofanonpublicentitywouldbesimilarlypresentedbutwouldnotberequiredtoincludetheinformationcontainedinparagraphs5(a)–(c),5(h),5(m),and5(o)–(r)ofthisStatement.Theitemspresentedintheseexampleshavebeenincludedforillustrativepurposes.Certainassumptionshavebeenmadetosimplifythecomputationsandfocusonthedisclosurerequirements.Illustration1replacesIllustrations1,2,and3inStatement132,whichsupersededIllustration6inStatement87andIllustration7inStatement106.

Illustration 1 — Disclosures About Pension and Other Postretirement Benefit Plans in the Annual Financial Statements of a Publicly Traded Entity

C2. Thefollowingillustratesthefiscal20X3financialstatementdisclosuresforanemployer(CompanyA)withmultipledefinedbenefitpensionplansandotherpostretirementbenefitplans.Narrativedescriptionsofthebasisusedtodeterminetheoverallexpectedlong-termrate-of-return-on-assetsassumption(paragraph5(d)(3))andinvestmentpoliciesandstrategiesforplanassets(paragraph5(d)(2))arenotincludedinthisillustration.Thesenarrativedescriptionsaremeanttobeentity-specificandshouldreflectanentity’sbasisforselectingtheexpectedlong-termrate-of-return-on-assetsassumptionandthemostimportantinvestmentpoliciesandstrategies.

102 Deloitte

C3. During20X3,CompanyAacquiredFVIndustriesandamendeditsplans.

Notes to Financial Statements

Pension and Other Postretirement Benefit PlansCompanyAhasbothfundedandunfundednoncontributorydefinedbenefitpensionplansthattogethercoversubstantiallyallofitsemployees.Theplansprovidedefinedbenefitsbasedonyearsofserviceandfinalaveragesalary.

CompanyAalsohasotherpostretirementbenefitplanscoveringsubstantiallyallofitsemployees.Thehealthcareplansarecontributorywithparticipants’contributionsadjustedannually;thelifeinsuranceplansarenoncontributory.Theaccountingforthehealthcareplansanticipatesfuturecost-sharingchangestothewrittenplansthatareconsistentwiththecompany’sexpressedintenttoincreaseretireecontributionseachyearby50percentofhealthcarecostincreasesinexcessof6percent.Thepostretirementhealthcareplansincludealimitonthecompany’sshareofcostsforrecentandfutureretirees.

CompanyAacquiredFVIndustriesonDecember27,20X3,includingitspensionplansandotherpostretirementbenefitplans.Amendmentsmadeattheendof20X3toCompanyA’splansincreasedthepensionbenefitobligationsby$70andreducedtheotherpostretirementbenefitobligationsby$75.

(Continuedonnextpage)

Obligations and Funded Status at December 31

Pension Benefits Other Benefits

20X3 20X2 20X3 20X2

Change in benefit obligation

Benefitobligationatbeginningofyear $1,246 $1,200 $742 $712

Servicecost 76 72 36 32

Interestcost 90 88 55 55

Planparticipants’contributions 20 13

Amendments 70 (75)

Actuarialloss 20 25

Acquisition 900 600

Benefitspaid (125) (114) (90) (70)

Benefitobligationatendofyear 2,277 1,246 1,313 742

Appendix E PostretirementBenefits

Deloitte 103

(Continuedfrompreviouspage)


Obligations and Funded Status at December 31


20X3 20X2 20X3 20X2

Change in plan assets

Fairvalueofplanassetsatbeginningofyear 1,068 894 206 87

Actualreturnonplanassets 29 188 5 24

Acquisition 1,000 25

Employercontribution 75 100 137 152

Planparticipants’contributions 20 13

Benefitspaid (125) (114) (90) (70)

Fairvalueofplanassetsatendofyear 2,047 1,068 303 206

Fundedstatusatendofyear $(230) $(178) $(1,010) $(536)

Note: Nonpublic entities are not required to provide information in the above tables; they are required to disclose the employer’s contributions, participants’ contributions, benefit payments, and the funded status.

Amountsrecognizedinthestatementoffinancialpositionconsistof:

Pension Benefits Other Benefit

20X3 20X2 20X3 20X2

Noncurrentassets $227 $127 $0 $0

Currentliabilities (125) (125) (150) (150)

Noncurrentliabilities (332) (180) (860) (386)

$(230) $(178) $(1,010) $(536)

Amountsrecognizedinaccumulatedothercomprehensiveincomeconsistof:


20X3 20X2 20X3 20X2

Netloss(gain) $94 $18 $(11) $(48)

Priorservicecost(credit) 210 160 (92) (22)

$304 $178 $(103) $(70)

104 Deloitte

Theaccumulatedbenefitobligationforalldefinedbenefitpensionplanswas$1,300and$850atDecember31,20X3,and20X2,respectively.

Information for Pension Plans With an Accumulated Benefit Obligation in Excess of Plan Assets

December 31

20X3 20X2

Projectedbenefitobligation $263 $247

Accumulatedbenefitobligation 237 222

Fairvalueofplanassets 84 95

Components of Net Periodic Benefit Cost and Other AmountsRecognized in Other Comprehensive Income


20X3 20X2 20X3 20X2

Net periodic benefit cost

Servicecost $76 $72 $36 $32


Expectedreturnonplanassets (85) (76) (17) (8)

Amortizationofpriorservicecost 20 16 (5) (5)

Amortizationofnet(gain)loss 0 0 0 0

Netperiodicbenefitcost $101 $100 $69 $74

Other changes in plan assets and benefit obligations recognized in other comprehensive income

Netloss(gain) $76 $112 $37 $(48)

Priorservicecost(credit) 70 0 (75) (27)

Amortizationofpriorservicecost (20) (16) 5 5

Totalrecognizedinothercomprehensiveincome 126 96 (33) (70)

Totalrecognizedinnetperiodicbenefitcostandothercomprehensiveincome $227 $196 $36 $4

Theestimatednetlossandpriorservicecostforthedefinedbenefitpensionplansthatwillbeamortizedfromaccumulatedothercomprehensiveincomeintonetperiodicbenefitcostoverthenextfiscalyearare$4and$27,respectively.Theestimatedpriorservicecreditfortheotherdefinedbenefitpostretirementplansthatwillbeamortizedfromaccumulatedothercomprehensiveincomeintonetperiodicbenefitcostoverthenextfiscalyearis$10.

Note: Nonpublic entities are not required to separately disclose components of net periodic benefit cost.


Deloitte 105

Assumptions

Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31


20X3 20X2 20X3 20X2

Discountrate 6.75% 7.25% 7.00% 7.50%

Rateofcompensationincrease 4.25 4.50

Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31


20X3 20X2 20X3 20X2

Discountrate 7.25% 7.50% 7.50% 7.75%

Expectedlong-termreturnonplanassets 8.00 8.50 8.10 8.75

Rateofcompensationincrease 4.50 4.75

(Entity-specificnarrativedescriptionofthebasisusedtodeterminetheoverallexpectedlong-termrateofreturnonassets,asdescribedinparagraph5(d)(3),wouldbeincludedhere.)

Assumed Health Care Cost Trend Rates at December 31

20X3 20X2

Healthcarecosttrendrateassumedfornextyear 12% 12.5%

Ratetowhichthecosttrendrateisassumedtodecline(theultimatetrendrate) 6% 5%

Yearthattheratereachestheultimatetrendrate 20X9 20X9


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Assumedhealthcarecosttrendrateshaveasignificanteffectontheamountsreportedforthehealthcareplans.Aone-percentage-pointchangeinassumedhealthcarecosttrendrateswouldhavethefollowingeffects:

1-Percentage- Point Increase

1-Percentage- Point

Decrease

Effectontotalofserviceandinterestcost $22 $(20)

Effectonpostretirementbenefitobligation 173 (156)

Note: Nonpublic entities are not required to provide the above information about the impact of a one-percentage-point increase and one-percentage-point decrease in the assumed health care cost trend rates.

Plan Assets

CompanyA’spensionplanweighted-averageassetallocationsatDecember31,20X3,and20X2,byassetcategoryareasfollows:

Plan Assets at December 31

Asset Category 20X3 20X2

Equitysecurities 50% 48%

Debtsecurities 30 31

Realestate 10 12

Other 10 9

Total 100% 100%

(Entity-specificnarrativedescriptionofinvestmentpoliciesandstrategiesforplanassets,includingweighted-averagetargetassetallocations[ifusedaspartofthosepoliciesandstrategies]asdescribedinparagraph5(d)(2),wouldbeincludedhere.)

EquitysecuritiesincludeCompanyAcommonstockintheamountsof$80million(4percentoftotalplanassets)and$64million(6percentoftotalplanassets)atDecember31,20X3,and20X2,respectively.


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CompanyA’sotherpostretirementbenefitplanweighted-averageassetallocationsatDecember31,20X3,and20X2,byassetcategoryareasfollows:

Asset Category

Plan Assets at December 31

20X3 20X2

Equitysecurities 60% 52%

Debtsecurities 30 27

Realestate 5 13

Other 5 8

Total 100% 100%

EquitysecuritiesincludeCompanyAcommonstockintheamountsof$12million(4percentoftotalplanassets)and$8million(4percentoftotalplanassets)atDecember31,20X3,and20X2,respectively.

Cash Flows

ContributionsCompanyAexpectstocontribute$125milliontoitspensionplanand$150milliontoitsotherpostretirementbenefitplanin20X4.

Estimated Future Benefit Payments

Thefollowingbenefitpayments,whichreflectexpectedfutureservice,asappropriate,areexpectedtobepaid:

Pension Benefits

Other Benefits

20X4 $200 $150

20X5 208 155

20X6 215 160

20X7 225 165

20X8 235 170

Years20X9–20Y3 1,352 984

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Illustration 2 — Interim-Period Disclosures of a Publicly Traded Entity

C4. Thefollowingillustratesthedisclosuresofapubliclytradedentityforthefirstfiscalquarter

beginningafterDecember15,20X3.

Components of Net Periodic Benefit Cost

Three Months Ended March 31


20X4 20X3 20X4 20X3

Servicecost $35 $19 $16 $9


Expectedreturnonplanassets (41) (21) (6) (4)

Amortizationofpriorservicecost 7 5 (3) (1)

Amortizationofnet(gain)loss 2 0 0 0

Netperiodicbenefitcost $41 $26 $30 $18

Employer Contributions

CompanyApreviouslydisclosedinitsfinancialstatementsfortheyearendedDecember31,20X3,thatitexpectedtocontribute$125milliontoitspensionplanin20X4.AsofMarch31,20X4,$20millionofcontributionshavebeenmade.CompanyApresentlyanticipatescontributinganadditional$120milliontofunditspensionplanin20X4foratotalof$140million.

Illustration 3 — Interim-Period Disclosures of a Nonpublic Entity in a Complete Set of Financial Statements

C5. Thefollowingillustratesthedisclosuresforanonpublicentity(EntityA)forthefirstfiscalquarterbeginningafterDecember15,20X3.

EntityApreviouslydisclosedinitsfinancialstatementsfortheyearendedDecember31,20X3,thatitexpectedtocontribute$125milliontoitspensionplanin20X4.AsofMarch31,20X4,$20millionofcontributionshavebeenmade.EntityApresentlyanticipatescontributinganadditional$120milliontofunditspensionplanin20X4foratotalof$140million.


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Appendix F — SEC Management’s Discussion and Analysis Disclosure GuidanceThematerialbelowisreprintedfromSectionII(J)(2)oftheSEC’sCurrentAccountingandDisclosureIssuesintheDivisionofCorporationFinance(asupdatedNovember30,2006).ThesectionoutlinescertainSECstaffviewsregardingManagement’sDiscussionandAnalysis(MD&A)disclosurerequirementsforpensionandotherpostretirementbenefits.

Disclosure

Item303(a)ofRegulationS-Krequiresthedisclosureofanyknowntrends,demands,commitments,eventsoruncertaintiesthatwillresultinorthatarereasonablylikelytoresultintheregistrant’sliquidityincreasingordecreasinginanymaterialway,orwhichwouldcausereportedfinancialinformationnottobenecessarilyindicativeoffutureoperatingperformanceorfuturefinancialcondition.ThediscussionofemployeebenefitplansinMD&Ashouldprovidereaderswithinformationregardingthefollowingtotheextentmaterial:

thenatureoftheplans,

thecharacterofdeferredgainsandlosses,

thedegreetowhichimportantassumptionshavecoincidedwithactualexperience,and

thetimingandamountsoffuturefundingrequirements.

Thediscussionandanalysisofemployeebenefitsshouldalsoprovidereaderswithinformationregardingthefollowingtotheextentmaterial:

theeffectsofaccountingfortheregistrant’sbenefitplansand

thefundingoftheaccumulatedandprojectedbenefitobligationsontheregistrant’sfinancialconditionandoperatingperformance.

Assumptions and Estimates Theaccountingforemployeebenefitplanstypicallyinvolvesnumerousassumptionsandestimates,andfrequentlytheuseofexpertssuchasactuariesindeterminingassetallocationsandquantifyingbenefitobligations,fundingrequirements,andcompensationexpense.Theaccountingstandardsforpensionandpost-retirementplansalsoinvolvemechanismsthatservetolimitthevolatilityinearnings,whichwouldotherwiseresultfromrecordingchangesinthevalueofplanassetsandbenefitobligationsinthefinancialstatementsintheperiodsinwhichsuchchangesoccur.

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MD&Ashouldidentifythefollowing:

materialassumptionsunderlyingtheaccountingforbenefitplans,and

changestothoseassumptionshavingamaterialeffectonfinancialconditionandoperatingperformance.

RegistrantsshouldensurethatthedisclosureoftheiraccountingpoliciesandotherfootnotedisclosureinthefinancialstatementsarecomprehensiveandminimizeunnecessaryrepetitionofinformationinMD&A.

Changes to Assumptions and Estimates Aregistrantshouldconsidertheimpactofitsvariousassumptions,todeterminetheextenttowhichtheassumptionsorchangesintheassumptionshaveamaterialeffect,includingthoseconcerning:

thelong-termratesofreturnonplanassets,

discountratesusedforprojectingbenefitobligations,

methodsofderivingmarket-relatedvalue,

averageremainingserviceperiod,

averageremaininglifeexpectancy,and

anyalternatemethodsofamortizinggainsandlossesselected.

Whilesomeoftheseassumptionsaresubjecttofrequentrevision,othersmayberelativelystatic.Indescribingmaterialchangestotheassumptions,itmaybenecessarytoindicatehowoftenrevisionsaremade.

Comparison of Actual and Expected Results Accountingforemployeebenefitplansislargelydependentontheassumptionsconcerningtheperiodsofattribution(theprocessofassigningthecostofbenefitstoperiodofemployeeservice)andthecalculationandamortizationofgainsandlosses.Therefore,MD&Ashouldaddressthematerialtrendsorpatternsofamountsreflectedinthefinancialstatements,significantassumptionsandanymaterialvariationsbetweentheresultsbasedonthoseassumptions,andtheregistrant’sactualexperience.Forexample,whenresultsofoperationsaremateriallyimpactedbybenefitplans,theregistrantshoulddisclosethematerialunderlyingassumptionsandtheireffecttosufficientlyaddressthequalityoftheregistrant’searnings.Inaddition,whenmaterialdeviationsbetweentheactualandexpectedlong-termratesofreturnonplanassetsarise,thoseamountsshouldbedisclosed,asshouldanymaterialdeferredgainsorlossesthatresult.Underthesecircumstances,aregistrantshouldquantifytheamounts,andindicatetheperiodsinwhichthesewillbereflectedintheresultsofoperations.

Whenaddressingtheexpectedandactuallong-termratesofreturnonplanassets,registrantsshoulddisclose,wherematerial:

thevariouscategoriesofinvestmentsheldasplanassets,

therelativeassetallocationsorholdingsineachcategory,and

anyreasonablylikelychangesintheallocationofplanassets.

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Appendix F PostretirementBenefits

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Asensitivityanalysis,demonstratinghowachangeintheassumedlong-termratesofreturnwouldimpacttheresultsofoperations,mayalsobenecessarytosufficientlyconveythequalityoftheregistrant’searningsandthedegreeofuncertainty.Ifdeferredgainsandlossesarematerial,aregistrantshoulddiscusstheamortizationperiods,whiledifferentiatingbetweengainsandlossesthataresubjecttoamortizationandthosethatarenot.

OtherdisclosuresinMD&Arelatedtobenefitplans,includingthoserelatedtoexposure,recognitionandfundingobligations,shouldfollowasimilarapproach.MD&Ashouldbuildonandnotunnecessarilyrepeatinformationdisclosedinthenotestothefinancialstatements.Registrantsshoulddisclosematerialassumptionsandchangesinassumptions,theresultingmaterialeffectonfinancialconditionandoperatingperformance,materialdeviationsbetweenresultsbasedontheassumptionsusedbyregistrantsandactualplanperformance,andtheknownmaterialtrendsanduncertaintiesrelatingtoplans,includingthosecausedbythesedeviations.Forexample,registrantsshouldconsiderwhetherdisclosureofthehistoricalpatternofexpenserecognitionandtheperiodsoverwhichanyamountsdeferredinothercomprehensiveincomewillberecognizedinresultsofoperationsisnecessary.

Funding Obligations Iftherearematerialfundingobligations,aregistrantshould:

quantifytheamountsofthefundingobligations,

addressthematerialknowntrendsoruncertaintiesrelatingtopayingsuchamounts(forexample,iftheregistrantexpectstopaythemoveraspecifiedperiodoftime,orifthereareknownmaterialuncertaintiesconcerningpayment),

addressthematerialimpactoffuturepaymentsonfuturecashflows,and

addressanymaterialuncertaintyinthefundingobligationitself(forexample,uncertaintyintroducedbysignificantdifferencesbetweenthedurationofdebtinstrumentsincludedinplanassets,orchangingdemographicsintheworkforce,andtheexpectedtimingoffuturebenefitpayments).

Thefundingofpensionobligationsisinfluencedbyseveralfactors,amongthem,voluntarycontributionsandfundingrequirementsdeterminedbyERISAandtheIRS.Therequiredcontributionisacalculatedamount,whichincreasesforcertainunderfundedplansintheformofadeficitreductioncontributionandcouldbedecreasedifexcessfundingcreditsareavailable.Registrantswhoareexperiencingfinancialdifficultymayconcludethatthereissignificantuncertaintysurroundingfuturefundingofpensionobligations,primarilyduetothepossibilityofbankruptcywhichinturncouldresultintheterminationofthepensionplan.Registrantswhosefuturefundingisuncertainduetofinancialdifficultyshoulddisclosethenatureoftheuncertaintyandarangeofreasonablypossiblefuturefunding,whichmayincludedisclosureofthestatutoryterminationobligation.

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Appendix F PostretirementBenefits

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Appendix G — U.S. GAAP Accounting and Disclosure Compliance ChecklistThischecklistsummarizesaccountinganddisclosurerequirementsforpensionsandotherpostretirementbenefits.Mostofthelanguageinthechecklistcomesdirectlyfromtheunderlyingstandards(indicatedinbrackets).Althoughthischecklistisdesignedtohelpreaderscomplywiththosepronouncements,itisnotasubstituteforunderstandingthemorfortheexerciseofjudgment.

TheinformationinthischecklistreflectspronouncementsthatareeffectiveasofDecember31,2006.Readersshouldalsoconsiderpronouncementsissuedoreffectivesubsequentlythatmayapplytothefinancialstatements,aswellasotherprofessionalliterature,suchasAICPAStatementsofPositionandAuditandAccountingGuides.

Thoroughknowledgeofthepronouncementsispresumed.Readersshouldrefertothemasnecessaryinconsideringtheapplicationofparticularitemsinthischecklist.IndividualsectionheadingsprovidereferencestotheAccountingStandards,CurrentText,2006/2007edition,publishedbytheFinancialAccountingStandardsBoard(“CurrentText”)(e.g.,“C38—CompensationtoEmployees:DeferredCompensationAgreements”referstosectionC38oftheCurrentText).ReferencesinthischecklistaretotheapplicablesectionsofOriginalPronouncements2006/2007:AccountingStandards(e.g.,[Statement106.13]).

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C38 — Compensation to Employees: Deferred Compensation Agreements

Accounting: Yes No NA

1.Ifthecompanyhasdeferredcompensationcontracts(otherthancontractsthat,iftakentogether,areequivalenttoapostretirementincomeplanorapostretirementhealthorwelfarebenefitplan),aretheestimatedamountstobepaidundereachcontractaccruedinasystematicandrationalmanner:[Statement106.13]

a.Totheextentthetermsofthecontractattributealloraportionoftheexpectedfuturebenefitstoanindividualyearoftheemployee’sservice,arethecostsofthosebenefitsrecognizedinthatyear? — — —

b.Totheextentthetermsofthecontractattributealloraportionoftheexpectedfuturebenefitstoaperiodofservicegreaterthanoneyear,arethecostsofthosebenefitsaccruedoverthatperiodofanemployee’sservice?[Notethattheamountsaccruedperiodicallyshallresultinanaccruedamountatthefulleligibilitydate(asdefinedinStatement106)equaltothethenpresentvalueofallfuturebenefitsexpectedtobepaid.][Opinion12.6A] — — —

2.Ifthedeferredcompensationcontractprovidesforperiodicpaymentstoemployeesortheirsurvivingspouseforlifewithaprovisionforaminimumlump-sumsettlementintheeventoftheearlydeathofoneorallofthebeneficiaries,istheestimatedamountoffuturepaymentstobemadeaccruedovertheperiodofactiveemploymentfromthetimethecontractisenteredinto?[Opinion12.7] — — —

3.Ifthecompanyhasdeferredcompensationcontractswhereamountsearnedbyanemployeeareinvestedina“RabbiTrust,”arethosearrangementsaccountedforinaccordancewithEITFIssueNo.97-14,“AccountingforDeferredCompensationArrangementsWhereAmountsEarnedAreHeldinaRabbiTrustandInvested”? — — —

Has the entity complied with the following Issues discussed by the Emerging Issues Task Force, when applicable? — — —

06-4,“AccountingforDeferredCompensationandPostretirementBenefitAspectsofEndorsementSplit-DollarLifeInsuranceArrangements”—Theissueiswhetherthebenefitassociatedwithanendorsementsplit-dollarlifeinsurancearrangementiseffectivelysettledinaccordancewitheitherStatement106orOpinion12uponenteringintosuchanarrangement.ThisIssueiseffectiveforfiscalyearsbeginningafterDecember15,2007,withearlierapplicationpermitted.

96-5,“RecognitionofLiabilitiesforContractualTerminationBenefitsorChangingBenefitPlanAssumptionsinAnticipationofaBusinessCombination”—TheTaskForcereachedaconsensusthattheliabilityforthecontractualterminationbenefitsandthecurtailmentlossesunderemployeebenefitplansthatwillbetriggeredbytheconsummationofthebusinesscombinationshouldberecognizedwhenthebusinesscombinationisconsummated(ratherthanwhenprobable).

Appendix G PostretirementBenefits

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C38 — Compensation to Employees: Deferred Compensation Agreements


93-3,“PlanAssetsUnderFASBStatementNo.106”—ThisIssueinterpretsparagraphs308and518ofStatement106.TheTaskForcereachedaconsensusthatitisnotnecessarytodeterminethatatrustisbankruptcy-prooffortheassetsofthetrusttoqualifyasplanassetsunderStatement106.TheTaskForcealsoreachedaconsensusthatassetsheldinatrustthatexplicitlyprovidesthatsuchassetsareavailabletothegeneralcreditorsoftheemployerintheeventoftheemployer’sbankruptcywouldnotqualifyasplanassetsunderStatement106.

86-27,“MeasurementofExcessContributionstoaDefinedContributionPlanorEmployeeStockOwnershipPlan”—ThisIssueinterpretsparagraph105ofStatement106.ThisIssuedeterminestheaccountingtreatmentforexcesscontributionstoadefinedcontributionoremployeestockownershipplanthatarenotallocatedtoindividualparticipantaccounts.

P16 — Pension Costs


FASBStatementNo.158,Employers’AccountingforDefinedBenefitPensionandOtherPostretirementPlans—anamendmentofFASBStatementsNo.87,88,106,and132(R),wasissuedinSeptember2006.TherecognitionandrelateddisclosureprovisionsofStatement158areeffectiveasoftheendofthefiscalyearendingafterDecember15,2006,foranemployerwithpubliclytradedequitysecuritiesandasoftheendofthefiscalyearendingafterJune15,2007,forallotherentities.Retrospectiveapplicationisprohibited.Applicationasoftheendofanearlierfiscalyearispermitted;however,earlyapplicationshallbeforallofanemployer’sbenefitplans.ThemeasurementdateprovisionsofStatement158areeffectiveforfiscalyearsendingafterDecember15,2008,forallentitiesandshallnotbeappliedretrospectively.Earlierapplicationispermitted;however,earlyapplicationshallbeforallofanemployer’sbenefitplans.

Prior to adoption of Statement 158, only Section I below should be completed. Upon adoption, only Section II below should be completed.

Section I

1.Ifadefinedbenefitplan(s)exists,havethefollowingrequirementswithrespecttoassumptionsbeenmet:[Statement87.43–.48]

a.Eachassumptionrepresentsthebestestimateforthatassumptionandassumestheplanwillcontinueineffectintheabsenceofevidencethatitwillnotcontinue?[Statement87.43] — — —

b.Assumeddiscountratesreflecttheratesatwhichthepensionbenefitscouldbeeffectivelysettled?[Statement87.44] — — —

c.Theexpectedlong-termrateofreturnonplanassetsreflectstheaveragerateofearningsexpectedonthefundsinvestedortobeinvestedtoprovideforthebenefitsincludedintheprojectedbenefitobligation(PBO)?[Statement87.45] — — —


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d.TheservicecostcomponentofnetperiodicpensioncostandthePBOreflectfuturecompensationlevelstotheextentthatthepensionbenefitformuladefinespensionbenefitswhollyorpartiallyasafunctionoffuturecompensationlevels?[Statement87.46] — — —

e.TheservicecostcomponentofnetperiodicpensioncostandthePBOreflectfutureincreasesinservicecostforwhichapresentsubstantivecommitmentexists?[Statement87.41,.46] — — —

f.Assumedcompensationlevelsreflectanestimateoftheactualfuturecompensationlevelsoftheindividualemployeesinvolved,includingfuturechangesattributedtogeneralpricelevels,productivity,seniority,promotion,andotherfactors?[Statement87.46] — — —

g.Allassumptionsthatreflectexpectationsofthesamefutureeconomicconditions,suchasfutureratesofinflation,areconsistent?[Statement87.46] — — —

h.Theaccumulatedbenefitobligation(ABO)ismeasuredbasedonemployees’historyofserviceandcompensationwithoutanestimateoffuturecompensationlevels?[Statement87.18,.47] — — —

i.InmeasuringtheABO,projectedyearsofserviceareincludedonlyindeterminingemployees’eligibilityforparticularbenefits,suchasincreasedbenefitsbasedonaspecifiednumberofyearsofservice,earlyretirementbenefits,deathbenefits,anddisabilitybenefits?[Statement87.47] — — —

j.AutomaticbenefitincreasesspecifiedbytheplanthatareexpectedtooccurareincludedinmeasurementsoftheprojectedaccumulatedandvestedbenefitobligationsandtheservicecostcomponentrequiredbyStatement87?[Statement87.48] — — —

k.Retroactiveplanamendmentsareincludedinthecomputationoftheprojectedandaccumulatedandvestedbenefitobligationsoncetheyhavebeencontractuallyagreedto,evenifsomeprovisionstakeeffectonlyinfutureperiods?[Statement87.48] — — —

2.Forpensionplanbenefitobligationsandassets:

a.IsthePBOmeasuredusinganassumptionastofuturecompensationlevelsifthepensionbenefitformulaisbasedonthosefuturecompensationlevels?[Statement87.17] — — —

b.Haveplanassetsbeensegregatedandrestrictedanddotheyincludeamountscontributedbytheemployer(andemployeesifacontributoryplan)andamountsearnedfrominvestingthecontributions,lessbenefitspaid?[Statement87.19] — — —

c.Havetheplanassetsandbenefitobligationsbeenmeasuredasofthedateoftheannualfinancialstatements,orifusedconsistentlyfromyeartoyear,asofadatenotmorethanthreemonthspriortothatdate?[Statement87.52] — — —

3.Ifthecompanyhastwoormoredefinedbenefitplans:


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a.Havenetperiodicpensioncost,liabilities,andassetsbeendeterminedseparatelyforeachplan?[Statement87.55] — — —

b.Iftheemployerdoesnothavetherighttousetheassetsofoneplantopaythebenefitsofanother,havetheunfundedaccruedpensioncost,prepaidpensioncost,andrecognitionofanadditionalminimumliability,ifrequiredbyparagraph35or36ofStatement87,beendeterminedseparatelyforeachplan?[Statement87.55] — — —

4.Ifbenefitsarecoveredbyannuityorotherinsurancecontracts,hastheaccountingconformedtotheprovisionsofStatement87?[Statement87.57–.62] — — —

5.Ifthecompanyhasadefinedcontributionplan(s):

a.Hastherequiredcontributionfortheperiodinwhichanindividualrendersservicebeenrecognizedasnetpensioncost?[Statement87.64] — — —

b.Iftheplancallsforcontributionsafteranindividualretiresorterminates,hasaportionofthecostbeenaccruedforemployeeserviceduringthecurrentperiod?[Statement87.64] — — —

6.Ifthecompanyparticipatesinamultiemployerplan(s):

a.Hastherequiredcontributionfortheperiodbeenrecognizedasnetpensioncost?[Statement87.68] — — —

b.Hasaliabilitybeenrecognizedforanyunpaidcontributionsrequiredfortheperiod?[Statement87.68] — — —

c.Ifwithdrawalfromamultiemployerplanundercircumstancesthatwouldgiverisetoanobligationisprobableorreasonablypossible,hasthecompanycompliedwiththeprovisionsofStatement5?[Statement87.70] — — —

7.Foremployerswithmultiple-employerplans,hastheemployer’saccountingbeenbasedonitsrespectiveinterestintheplan?[Statement87.71] — — —

8.Havenon-U.S.plansthatareinsubstancesimilartoU.S.plansbeenaccountedforinaccordancewithStatement87?[Statement87.72and.73] — — —

9.Businesscombinations—Haveamountsassignedtoindividualassetsacquiredandliabilitiesassumed,exceptgoodwill,beendeterminedinaccordancewiththefollowinggeneralguide?(Amongothersourcesofrelevantinformation,independentappraisalsandactuarialorothervaluationsmaybeusedasanaidindeterminingtheestimatedfairvaluesofassetsacquiredandliabilitiesassumed.) — — —

a.Aliability(asset)forthePBOinexcessof(lessthan)planassetsofasingle-employerdefinedbenefitpensionplan? — — —

b.Also,ifitisexpectedthattheplanwillbeterminatedorcurtailed,havetheeffectsofthoseactionsbeenconsideredinmeasuringthePBO?[Statement141.37,Statement87.74] — — —


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10.Doesthegainorlosscomponentofnetperiodicpensioncostconsistof(a)thedifferencebetweentheactualreturnonplanassetsandtheexpectedreturnonplanassetsand(b)amortizationoftheunrecognizednetgainorlossfrompreviousperiods(ifanyisrequiredpursuanttoparagraph32ofStatement87)?[Statement87.31and.32,.34] — — —

11.HastheunrecognizedtransitionnetassetorobligationbeenamortizedinaccordancewithStatement87indeterminingnetperiodicpensioncost?[Statement87.20,.77] — — —

12.HastheunrecognizedpriorservicecostorcreditbeenamortizedinaccordancewithStatement87indeterminingnetperiodicpensioncost?[Statement87.20,.24–.28] — — —

13.Regardingtherecognitionofpensionassetsandliabilities:

a.HasaliabilitybeenrecognizedifthenetperiodicpensioncostrecognizedpursuanttoStatement87exceedsamountstheemployerhascontributedtotheplan?[Statement87.35] — — —

b.Hasanassetbeenrecognizedifnetperiodicpensioncostrecognizedislessthantheamountstheemployerhascontributedtotheplan?[Statement87.35] — — —

c.IftheABOexceedsthefairvalueofplanassets,hasaminimumliability(includingunfundedaccruedpensioncost)beenrecognizedthatisatleastequaltotheunfundedABO?[Statement87.36] — — —

d.Ifrecognitionofanadditionalminimumliabilityisrequiredpursuanttoparagraph36ofStatement87,hasanequalamountbeenrecognizedasanintangibleasset,nottoexceedthetotalunrecognizedpriorservicecostsandunrecognizedtransitionobligation,withanyexcessbeingreportedinothercomprehensiveincome(OCI)(netoftax)?[Statement87.37] — — —

14.Ifthecompanyhadasettlement:[Statement88.3and.4,.7,.9–.11,.21b]

a.Hastheamountofthemaximumgainorlossincludedanyunrecognizednetgainorlossplusanyremainingunrecognizedtransitionasset?[Statement88.9] — — —

(1)IftheentirePBOwassettled,hasthemaximumamountbeenrecognized?[Statement88.9] — — —

(2)IfonlypartofthePBOwassettled,hasonlyaprorataportionofthemaximumamount,equaltothepercentagereductioninthePBO,beenrecognized?[Statement88.9] — — —

b.Ifthesettlementoccurredduetothepurchaseofaparticipatingannuitycontract,hasthemaximumgainbeenreducedbythecostoftheparticipationrightbeforedeterminingtheamounttoberecognizedinearnings?[Statement88.10] — — —


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c.Hastheaccountingpolicyadoptedforrecognitionofsettlementgainsandlosseswhenthecostsfortheyeararelessthanorequaltothesumoftheserviceandinterestcostcomponentsfortheyearbeenfollowedconsistently?[Statement88.11] — — —

d.Ifthegainorlossonthesettlementisdirectlyrelatedtothedisposalofacomponentofanentity,istheamountincludedindeterminingthegainorlossassociatedwiththatevent?[Statement144.44(c)] — — —

15.Ifthecompanyhadacurtailment:[Statement88.6,.12–.14,.21]

a.Hastheunrecognizedpriorservicecostassociatedwithyearsofservicenolongerexpectedtoberenderedbeenrecognizedasaloss?[Statement88.12] — — —

(1)Hastheunrecognizedpriorservicecostincludedthecostofretroactiveamendmentsandanyremainingunrecognizednetobligation?[Statement88.12] — — —

b.HasthePBObeenincreased(loss)ordecreased(gain)bytheeffectsofthecurtailment?[Statement88.13] — — —

(1)HasanyremainingunrecognizedtransitionassetthatexistedatinitialapplicationofStatement87beentreatedasanunrecognizednetgainandcombinedwiththeunrecognizednetgainorlossarisingafterthetransitiontoStatement87?[Statement88.13] — — —

(2)Hastheincrease(loss)inthePBObeenoffsetagainstanygainasmeasuredin(b)(1)abovetotheextentthePBOincrease(loss)exceedsthegainmeasuredin(b)(1)above?[Statement88.13] — — —

(3)Hasthedecrease(gain)inthePBObeenoffsetagainstanylossasmeasuredin(b)(1)abovetotheextentthePBOdecrease(gain)exceedsthelossmeasuredin(b)(1)above?[Statement88.13] — — —

c.Hasthenetamountcalculatedin(b)(2)or(b)(3)beencombinedwiththepriorservicecostloss?[Statement88.13] — — —

d.Ifthetotaloftheeffectsof(a),(b),and(c)aboveisanetloss,hasitbeenrecognizedwhenitisprobablethatacurtailmentwilloccurandtheneteffectisreasonablyestimable?[Statement88.14] — — —

e.Ifthetotaloftheeffectsof(a),(b),and(c)aboveisanetgain,hasitbeenrecognizedwhentherelatedemployeesterminatedortheplansuspensionoramendmentwasadopted?[Statement88.14] — — —

f.Ifthegainorlossonthecurtailmentisdirectlyrelatedtothedisposalofacomponentofanentity,istheamountincludedindeterminingthegainorlossassociatedwiththatevent?[Statement144.44(c)] — — —

16.Ifthecompanyprovidedbenefitstoemployeesinconnectionwiththeirterminationofemployment(specialterminationbenefitsorcontractualterminationbenefits):[Statement88.15]


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a.Forspecialterminationbenefits,hasaliabilityandalossbeenrecognizedwhentheemployeesacceptedtheofferandtheamountcanbereasonablyestimated? — — —

b.Forcontractualterminationbenefits,hasaliabilityandalossbeenrecognizedwhenitisprobablethatemployeeswillbeentitledtobenefitsandtheamountcanbereasonablyestimated? — — —

c.Hasthecostofterminationbenefitsrecognizedasaliabilityandalossincludedtheamountofanylump-sumpaymentsandthepresentvalueofanyexpectedfuturepayments? — — —

d.Iftheterminationbenefitsaredirectlyrelatedtodisposalofacomponentofanentity,isthecostincludedindeterminingthegainorlossassociatedwiththatevent?[Statement144.44(c)] — — —


05-5,“AccountingforEarlyRetirementorPostemploymentProgramsWithSpecificFeatures(SuchasTermsSpecifiedinAltersteilzeit[ATZ]EarlyRetirementArrangements)”—ThisIssueaddresses(1)howtoaccountforthebonusfeatureandadditionalcontributionsintotheGermangovernmentpensionschemeunderaTypeIIarrangementand(2)howtoaccountforthegovernmentsubsidyunderTypeIandTypeIIATZarrangements.

03-4,“DeterminingtheClassificationandBenefitAttributionMethodfora‘CashBalance’PensionPlan”—ThisIssueaddresses(1)whether,forpurposesofapplyingStatement87,cashbalanceplansshouldbeconsidereddefinedbenefitplansordefinedcontributionplansand(2)ifthatcashbalanceplanisdeterminedtobeadefinedbenefitplan,thenatureofthebenefitpromiseandtheappropriatebenefitattributionapproachbasedonthatpromise.

03-2,“AccountingfortheTransfertotheJapaneseGovernmentoftheSubstitutionalPortionofEmployeePensionFundLiabilities”—ThisIssueaddresseshowanemployershouldaccountfortheseparationofthesubstitutionalportionofthebenefitobligationofanemployees’pensionfundplanfromthecorporateportionandthetransferofthesubstitutionalportionandrelatedassetstotheJapanesegovernment.

96-5,“RecognitionofLiabilitiesforContractualTerminationBenefitsorChangingBenefitPlanAssumptionsinAnticipationofaBusinessCombination”—ThisIssueaddresseswhetheraliabilityforthecontractualterminationbenefitsandthecurtailmentlossesunderemployeebenefitplansthatwillbetriggeredbytheconsummationofthebusinesscombinationshouldberecognizedwhen(1)itisprobablethatthebusinesscombinationwillbeconsummatedor(2)thebusinesscombinationisconsummated.


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93-3,“PlanAssetsUnderFASBStatementNo.106”—ThisIssueaddresseswhetheratrustestablishedtopaypostretirementbenefitsmustbedeterminedtobebankruptcy-proofinorderfortheassetsinthetrusttoqualifyasplanassetsunderFASBStatementNo.106,Employers’AccountingforPostretirementBenefitsOtherThanPensions.

92-12,“AccountingforOPEBCostsbyRate-RegulatedEnterprises”—ThisIssueaddresseswhatcriteriaorevidenceisneededforarate-regulatedenterprisetosatisfytherequirementsofFASBStatementNo.71,AccountingfortheEffectsofCertainTypesofRegulation,torecognizearegulatoryassetforStatement106costs.

91-7,“AccountingforPensionBenefitsPaidbyEmployersAfterInsuranceCompaniesFailtoProvideAnnuityBenefits”—ThisIssueaddresseshowanemployershouldaccountforthecostofmakingupadeficiencyinannuitypaymentstotheretireesduetoaninsurancecompanybecominginsolventorunabletomakethepayments.

90-3,“AccountingforEmployers’ObligationsforFutureContributionstoaMultiemployerPensionPlan”—ThisIssueaddresseswhetheranemployerthatparticipatesinamultiemployerpensionplanmustrecordaliabilityforthetotalfuturepaymentsforpriorservicecostspursuanttoanagreementatthedatetheemployerenterstheplanorimprovesbenefitsundertheplan.

88-23,“Lump-SumPaymentsUnderUnionContracts”—ThisIssuerelatestoalump-sumcashpaymentorpaymentsinlieuofalloraportionofanincreaseinaunionmember’sbasewagerateandwhetherthelump-sumpaymentorpaymentsshouldbe(1)chargedtoexpenseimmediatelyor(2)amortizedoverallorsomeportionofthecontractperiod.

88-1,“DeterminationofVestedBenefitObligationforaDefinedBenefitPensionPlan”—ThisIssueaddresseswhetherthevestedbenefitobligationistheactuarialpresentvalueofthevestedbenefitstowhichtheemployeeisentitlediftheemployeeseparatesimmediatelyortheactuarialpresentvalueofthevestedbenefitstowhichtheemployeeiscurrentlyentitledbutbasedontheemployee’sexpecteddateofseparationorretirement.

86-27,“MeasurementofExcessContributionstoaDefinedContributionPlanorEmployeeStockOwnershipPlan”—ThisIssueaddresseshowanemployeraccountsforexcesscontributionsnotallocatedtoindividualparticipants’accountsindefinedcontributionplansoremployeestockownershipplans.

D-106,“ClarificationofQ&ANo.37ofFASBSpecialReport,AGuidetoImplementationofStatement87onEmployers’AccountingforPensions”—ThisIssuerevisedtheanswertoQ&A37,whichaddresseshowanemployershoulddeterminewhetheranadditionalminimumliabilityisrequiredifithasameasurementdateearlierthanitsfinancialreportdate.

D-36,“SelectionofDiscountRatesUsedforMeasuringDefinedBenefitPensionObligationsandObligationsofPostretirementBenefitPlansOtherThanPensions”—ThisIssueprovidesguidanceforselectingdiscountrates.


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D-27,“AccountingfortheTransferofExcessPensionAssetstoaRetireeHealthCareBenefitsAccount”—ThisIssuestatesthatthetransferofexcesspensionassetstoaretireehealthcarebenefitaccountshouldberecognizedasanegativecontributionto(withdrawaloffundsfrom)thepensionplanandapositivecontributiontotheretireehealthcareplan.Nogainorlossarisesfromthetransferoftheexcesspensionassets.

For enterprises that have adopted any of the provisions of Statement 158, the following section should be completed.

Section II

1.Ifadefinedbenefitplan(s)exists,havethefollowingrequirementswithrespecttoassumptionsbeenmet:[Statement87.43–48]

a.Eachassumptionrepresentsthebestestimateforthatassumptionandassumestheplanwillcontinueineffectintheabsenceofevidencethatitwillnotcontinue?[Statement87.43] — — —

b.Assumeddiscountratesreflecttheratesatwhichthepensionbenefitscouldbeeffectivelysettled?[Statement87.44] — — —

c.Theexpectedlong-termrateofreturnonplanassetsreflectstheaveragerateofearningsexpectedonthefundsinvestedortobeinvestedtoprovideforthebenefitsincludedinthePBO?[Statement87.45] — — —

d.TheservicecostcomponentofnetperiodicpensioncostandthePBOreflectfuturecompensationlevelstotheextentthatthepensionbenefitformuladefinespensionbenefitswhollyorpartiallyasafunctionoffuturecompensationlevels?[Statement87.46] — — —

e.TheservicecostcomponentofnetperiodicpensioncostandthePBOreflectfutureincreasesinservicecostforwhichapresentsubstantivecommitmentexists?[Statement87.41,.46] — — —

f.Assumedcompensationlevelsreflectanestimateoftheactualfuturecompensationlevelsoftheindividualemployeesinvolved,includingfuturechangesattributedtogeneralpricelevels,productivity,seniority,promotion,andotherfactors?[Statement87.46] — — —

g.Allassumptionsthatreflectexpectationsofthesamefutureeconomicconditions,suchasfutureratesofinflation,areconsistent?[Statement87.46] — — —

h.TheABOismeasuredbasedonemployees’historyofserviceandcompensationwithoutanestimateoffuturecompensationlevels?[Statement87.18,.47] — — —

i. InmeasuringtheABO,projectedyearsofserviceareincludedonlyindeterminingemployees’eligibilityforparticularbenefits,suchasincreasedbenefitsbasedonaspecifiednumberofyearsofservice,earlyretirementbenefits,deathbenefits,anddisabilitybenefits?[Statement87.47] — — —


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j. Automaticbenefitincreasesspecifiedbytheplanthatareexpectedtooccurareincludedinmeasurementsoftheprojected,accumulatedandvestedbenefitobligationsandtheservicecostcomponentrequiredbyStatement87?[Statement87.48] — — —

k.RetroactiveplanamendmentsareincludedinthecomputationoftheprojectedandABOsoncetheyhavebeencontractuallyagreedto,evenifsomeprovisionstakeeffectonlyinfutureperiods?[Statement87.48] — — —

2.Forpensionplanbenefitobligationsandassets:

a.IsthePBOmeasuredusinganassumptionastofuturecompensationlevelsifthepensionbenefitformulaisbasedonthosefuturecompensationlevels?[Statement87.17] — — —

b.Haveplanassetsbeensegregatedandrestrictedanddotheyincludeamountscontributedbytheemployer(andemployeesifacontributoryplan)andamountsearnedfrominvestingthecontributions,lessbenefitspaid?[Statement87.19] — — —

c.Havetheplanassetsandbenefitobligationsbeenmeasuredasofthedateoftheannualfinancialstatementsexceptinspecificsituationsoutlinedinparagraph52ofStatement87(asamended)? — — —

[NotethatiftheentityhasnotadoptedthemeasurementdateprovisionsofStatement158(whichareeffectiveforfiscalyearsendingafterDecember15,2008forallentities),theentitymayuseameasurementdateasofadatenotmorethanthreemonthspriortoitsfiscalyear-end,ifitisusedconsistentlyfromyeartoyear,untiltheentityadoptsStatement158’smeasurementdateprovisions.][Statement158.C2(p),Statement87.52]


a.Havenetperiodicpensioncost,liabilities,andassetsbeendeterminedseparatelyforeachplan?[Statement87.55] — — —

b.Iftheemployerdoesnothavetherighttousetheassetsofoneplantopaythebenefitsofanother,havethenetperiodicpensioncostandtherecognitionofanunderfundedpensionliabilityoranoverfundedpensionasset,asrequiredbyparagraph35ofStatement87,beendeterminedseparatelyforeachplan?[Statement87.55] — — —

4.Ifbenefitsarecoveredbyannuityorotherinsurancecontracts,hastheaccountingconformedtotheprovisionsofStatement87?[Statement87.57–.62] — — —


a.Hastherequiredcontributionfortheperiodinwhichanindividualrendersservicebeenrecognizedasnetpensioncost?[Statement87.64] — — —



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a.Hastherequiredcontributionfortheperiodbeenrecognizedasnetpensioncost?[Statement87.68] — — —


c.Ifwithdrawalfromamultiemployerplanundercircumstancesthatwouldgiverisetoanobligationisprobableorreasonablypossible,hasthecompanycompliedwiththeprovisionsofStatement5?[Statement87.70] — — —


8.Havenon-U.S.plansthatareinsubstancesimilartoU.S.plansbeenaccountedforinaccordancewithStatement87?[Statement87.72and.73] — — —

9.Businesscombinations—Haveamountsassignedtoindividualassetsacquiredandliabilitiesassumed,exceptgoodwill,beendeterminedinaccordancewiththefollowinggeneralguide?(Amongothersourcesofrelevantinformation,independentappraisalsandactuarialorothervaluationsmaybeusedasanaidindeterminingtheestimatedfairvaluesofassetsacquiredandliabilitiesassumed.)

a.Aliability(asset)forthePBOinexcessof(lessthan)planassetsofasingle-employerdefinedbenefitpensionplan? — — —

b.Also,ifitisexpectedthattheplanwillbeterminatedorcurtailed,havetheeffectsofthoseactionsbeenconsideredinmeasuringthePBO?[Statement141.37,Statement87.74] — — —

10.Doesthegainorlosscomponentofnetperiodicpensioncostconsistof(a)thedifferencebetweentheactualreturnonplanassetsandtheexpectedreturnonplanassetsand(b)amortizationofthenetgainorlossincludedinaccumulatedothercomprehensiveincome(AOCI)(ifanyisrequiredpursuanttoparagraph32ofStatement87)?[Statement158.C2(i),Statement87.31and.32,.34] — — —

11.HasthetransitionnetassetorobligationbeenamortizedinaccordancewithStatement87indeterminingnetperiodicpensioncost?[Statement87.20,.77] — — —

12.HasthepriorservicecostorcreditbeenamortizedinaccordancewithStatement87indeterminingnetperiodicpensioncost?[Statement87.20,.24–.28] — — —

13.Regardingtherecognitionofpensionassetsandliabilities:

a.HasaliabilitybeenrecognizedthatequalstheunfundedPBOifthePBOexceedsthefairvalueofplanassets?[Statement158.C2(j),Statement87.35] — — —

b.HasanassetbeenrecognizedthatequalstheoverfundedPBOifthefairvalueofplanassetsexceedsthePBO?[Statement158.C2(j),Statement87.35] — — —

14.Ifthecompanyhadasettlement:[Statement158.C6(a),Statement88.3and.4,.7,.9–.11,.21b


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a.HastheamountofthemaximumgainorlossincludedanynetgainorlossremaininginAOCIplusanytransitionassetremaininginAOCI?[Statement158.C6(a),Statement88.9] — — —

(1)IftheentirePBOwassettled,hasthemaximumamountbeenrecognized?[Statement88.9] — — —

(2)IfonlypartofthePBOwassettled,hasonlyaprorataportionofthemaximumamount,equaltothepercentagereductioninthePBO,beenrecognized?[Statement88.9] — — —

b.Ifthesettlementoccurredduetothepurchaseofaparticipatingannuitycontract,hasthemaximumgainbeenreducedbythecostoftheparticipationrightbeforedeterminingtheamounttoberecognizedinearnings?[Statement88.10] — — —

c.Hastheaccountingpolicyadoptedforrecognitionofsettlementgainsandlosseswhenthecostsfortheyeararelessthanorequaltothesumoftheserviceandinterestcostcomponentsfortheyearbeenfollowedconsistently?[Statement88.11] — — —

d.Ifthegainorlossonthesettlementisdirectlyrelatedtothedisposalofacomponentofanentity,istheamountincludedindeterminingthegainorlossassociatedwiththatevent?[Statement144.44(c)] — — —

15.Ifthecompanyhadacurtailment:[Statement88.6,.12–.14,.21]

a.HasthepriorservicecostincludedinAOCIandassociatedwithyearsofservicenolongerexpectedtoberenderedbeenrecognizedasaloss?[Statement158.C6(b),Statement88.12] — — —

(1)HasthepriorservicecostremaininginAOCIincludedthecostofretroactiveamendmentsandanytransitionobligationremaininginAOCI?[Statement158.C6(b),Statement88.12] — — —

b.HasthePBObeenincreased(loss)ordecreased(gain)bytheeffectsofthecurtailment?[Statement158.C6(c),Statement88.13] — — —

(1)HasanytransitionassetremaininginAOCIbeentreatedasanetgainandcombinedwiththenetgainorlossremaininginAOCIarisingafterthetransitiontoStatement87?[Statement158.C6(c),88.13] — — —

(2)Hastheincrease(loss)inthePBObeenoffsetagainstanygainasmeasuredin(b)(1)abovetotheextentthePBOincrease(loss)exceedsthegainmeasuredin(b)(1)above?[Statement88.13] — — —

(3)Hasthedecrease(gain)inthePBObeenoffsetagainstanylossasmeasuredin(b)(1)abovetotheextentthePBOdecrease(gain)exceedsthelossmeasuredin(b)(1)above?[Statement88.13] — — —

c.Hasthenetamountcalculatedin(b)(2)or(b)(3)beencombinedwiththepriorservicecostloss?[Statement88.13] — — —


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d.Ifthetotaloftheeffectsof(a),(b),and(c)aboveisanetloss,hasitbeenrecognizedwhenitisprobablethatacurtailmentwilloccurandtheeffectsdescribedarereasonablyestimable.[Statement88.14] — — —



16.Ifthecompanyprovidedbenefitstoemployeesinconnectionwiththeirterminationofemployment(specialterminationbenefitsorcontractualterminationbenefits)[Statement88.15]:

a.Forspecialterminationbenefits,hasaliabilityandalossbeenrecognizedwhentheemployeesacceptedtheofferandtheamountcanbereasonablyestimated? — — —

b.Forcontractualterminationbenefits,hasaliabilityandalossbeenrecognizedwhenitisprobablethatemployeeswillbeentitledtobenefitsandtheamountcanbereasonablyestimated? — — —

c.Hasthecostofterminationbenefitsrecognizedasaliabilityandalossincludedtheamountofanylump-sumpaymentsandthepresentvalueofanyexpectedfuturepayments? — — —

d.Iftheterminationbenefitsaredirectlyrelatedtodisposalofacomponentofanentity,isthecostincludedindeterminingthegainorlossassociatedwiththatevent?[Statement144.44(c)] — — —


05-5,“AccountingforEarlyRetirementorPostemploymentProgramsWithSpecificFeatures(SuchasTermsSpecifiedinAltersteilzeit[ATZ]EarlyRetirementArrangements)”—ThisIssueaddresses(1)howtoaccountforthebonusfeatureandadditionalcontributionsintotheGermangovernmentpensionschemeunderaTypeIIarrangementand(2)howtoaccountforthegovernmentsubsidyunderTypeIandTypeIIATZarrangements.



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03-2,“AccountingfortheTransfertotheJapaneseGovernmentoftheSubstitutionalPortionofEmployeePensionFundLiabilities”—ThisIssueaddresseshowanemployershouldaccountfortheseparationofthesubstitutionalportionofthebenefitobligationofanemployees’pensionfundplanfromthecorporateportionandthetransferofthesubstitutionalportionandrelatedassetstotheJapanesegovernment.


93-3,“PlanAssetsUnderFASBStatementNo.106”—ThisIssueaddresseswhetheratrustestablishedtopaypostretirementbenefitsmustbedeterminedtobebankruptcy-proofinorderfortheassetsinthetrusttoqualifyasplanassetsunderFASBStatementNo.106,Employers’AccountingforPostretirementBenefitsOtherThanPensions.






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P16 — Pension Costs (Including Other Postretirement Benefit Plans)

Disclosure: Yes No NA



Section I

1.AnnualDisclosures—PublicandNonpublicEntities

a.Havethedisclosuresforearlierannualperiodspresentedforcomparativepurposesbeenrestatedfor:[Statement132(R).20]


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(1)Thepercentageofeachmajorcategoryofplanassetsheld? — — —

(2)TheABO? — — —

(3)Theassumptionsusedintheaccountingfortheplans? — — —

2.AnnualDisclosures—PublicEntities

a.Ifanemployersponsorsoneormoredefinedbenefitpensionplansoroneormoreotherdefinedbenefitpostretirementplans,hasthefollowinginformationbeenprovidedseparatelyforpensionplansandotherpostretirementbenefitplans:[Statement132(R).5]

(1)Theamountsrelatedtotheemployer’sresultsofoperationsdisclosedforeachperiodforwhichastatementofincomeispresented?[Statement132(R).5]

— — —

(2)Theamountsrelatedtotheemployer’sstatementoffinancialposition,unlessotherwisestated,disclosedasofthemeasurementdateusedforeachstatementoffinancialpositionpresented?[Statement132(R).5] — — —

b.Havethefollowingdisclosuresbeenmade:

(1)Areconciliationofbeginningandendingbalancesofthebenefitobligationshowingseparately,ifapplicable,theeffectsduringtheperiodattributabletoeachofthefollowing:[Statement132(R).5(a)]

(a)Servicecost? — — —

(b)Interestcost? — — —

(c)Contributionsbyplanparticipants? — — —

(d)Actuarialgainsandlosses? — — —

(e)Foreigncurrencyexchangeratechanges? — — —

(f)Benefitspaid? — — —

(g)Planamendments? — — —

(h)Businesscombinations? — — —

( i )Divestitures? — — —

(j )Curtailments? — — —

(k)Settlements? — — —

( l )Specialterminationbenefits? — — —

(2)Areconciliationofbeginningandendingbalancesofthefairvalueofplanassetsshowingseparately,ifapplicabletheeffectsduringtheperiodattributabletoeachofthefollowing:[Statement132(R).5(b)]

(a)Actualreturnonplanassets? — — —

(b)Foreigncurrencyexchangeratechanges? — — —


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(c)Contributionsbytheemployer? — — —

(d)Contributionsbyplanparticipants? — — —

(e)Benefitspaid? — — —

(f)Businesscombinations? — — —

(g)Divestitures? — — —

(h)Settlements? — — —

(3)Thefundedstatusoftheplans,theamountsnotrecognizedinthestatementoffinancialposition,andtheamountsrecognizedinthestatementoffinancialposition,including:[Statement132(R).5(c)]

(a)Theamountofanyunamortizedpriorservicecost? — — —

(b)Theamountofanyunrecognizednetgainorloss(includingassetgainsandlossesnotyetreflectedinmarket-relatedvalue)? — — —

(c)Theamountofanyremainingunamortized,unrecognizednetobligation,ornetassetexistingattheinitialdateofapplicationofStatement87orStatement106? — — —

(d)Thenetpensionorotherpostretirementbenefitprepaidassetsoraccruedliabilities? — — —

(e)AnyintangibleassetandtheamountofAOCIrecognizedpursuanttoparagraph37ofStatement,asamended? — — —

(4)Informationaboutplanassets:[Statement132(R).5(d)]

(a)Foreachmajorcategoryofplanassets(equitysecurities,debtsecurities,realestate,andallotherassets),thepercentageofthefairvalueoftotalplanassetsheldasofthemeasurementdateusedforeachstatementoffinancialpositionpresented? — — —

(b)Anarrativedescriptionofinvestmentpoliciesandstrategies,includingtargetallocationpercentagesorrangeofpercentagesforeachmajorcategoryofplanassetspresentedonaweighted-averagebasisasofthemeasurementdateofthelateststatementoffinancialpositionpresented(ifapplicable),andotherpertinentfactorssuchasinvestmentgoals,riskmanagementpractices,allowableandprohibitedinvestmenttypesincludingtheuseofderivatives,diversification,andtherelationshipbetweenplanassetsandbenefitobligations? — — —

(c)Anarrativedescriptionofthebasisusedtodeterminetheoverallexpectedlong-termrate-of-returnonassetsassumption,suchasthegeneralapproachused,theextenttowhichtheoverallrate-of-returnonassetsassumptionwasbasedonhistoricalreturns,theextenttowhichadjustmentsweremadetothosehistoricalreturnsinordertoreflectexpectationsoffuturereturns,andhowthoseadjustmentsweredetermined? — — —


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(d)Disclosureofadditionalassetcategoriesandadditionalinformationaboutspecificassetswithinacategoryisencouragedifthatinformationisexpectedtobeusefulinunderstandingtherisksassociatedwitheachassetcategoryandtheoverallexpectedlong-termrateofreturnonassets? — — —

(5)Fordefinedbenefitpensionplans,theABO?[Statement132(R).5(e)] — — —

(6)Thebenefits(asofthedateofthelateststatementoffinancialpositionpresented)expectedtobepaidineachofthenextfiveyears,andintheaggregateforthenextsucceedingfiveyears?Theexpectedbenefitsshouldbeestimatedbasedonthesameassumptionsusedtomeasurethecompany’sbenefitobligationattheendoftheyearandshouldincludeestimatedfutureemployeeservice.[Statement132(R).5(f)] — — —

(7)Theemployer’sbestestimate,assoonasitcanbereasonablydetermined,ofcontributionsexpectedtobepaidtotheplanduringthenextfiscalyearbeginningafterthedateofthelateststatementoffinancialposition?Estimatedcontributionsmaybepresentedintheaggregatecombining(1)contributionsrequiredbyfundingregulationsorlaws,(2)discretionarycontributions,and(3)noncashcontributions?[Statement132(R).5(g)] — — —

(8)Theamountofnetperiodicbenefitcostrecognized,showingseparately:[Statement132(R).5(h)]

(a)Servicecostcomponent? — — —

(b)Interestcostcomponent? — — —

(c)Expectedreturnonplanassetsfortheperiod? — — —

(d)Amortizationoftheunrecognizedtransitionobligationortransitionasset? — — —

(e)Amountofrecognizedgainsandlosses? — — —

(f )Amountofpriorservicecostrecognized? — — —

(g)Amountofgainsorlossesrecognizedduetoasettlementorcurtailment? — — —

(9)TheamountincludedwithinOCIfortheperiodarisingfromachangeintheadditionalminimumpensionliabilityrecognizedpursuanttoparagraph37ofStatement87,asamended?[Statement132(R).5(i)] — — —

(10)Onaweighted-averagebasis,thefollowingassumptionsusedintheaccountingfortheplans,specifying,intabularformat,theassumptionsusedtodeterminethebenefitobligationandtheassumptionsusedtodeterminenetbenefitcost:[Statement132(R).5(j)]


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(a)Assumeddiscountrates? — — —

(b)Ratesofcompensationincrease(forpay-relatedplans)? — — —

(c)Expectedlong-termratesofreturnonplanassets? — — —

(11)Themeasurementdate(s)usedtodeterminepensionandotherpostretirementbenefitmeasurementsforthepensionplansandotherpostretirementbenefitplansthatmakeupatleastthemajorityofplanassetsandbenefitobligations?[Statement132(R).5(k)] — — —

(12)Theassumedhealthcarecosttrendrate(s)forthenextyearusedtomeasuretheexpectedcostofbenefitscoveredbytheplan(grosseligiblecharges),andageneraldescriptionofthedirectionandpatternofchangeintheassumedtrendratesthereafter,togetherwiththeultimatetrendrate(s)andwhenthatrateisexpectedtobeachieved?[Statement132(R).5(l)] — — —

(13)Theeffectofaone-percentage-pointincreaseandtheeffectofaone-percentage-pointdecreaseintheassumedhealthcarecosttrendrateson:[Statement132(R).5(m)]

(a)Theaggregateoftheserviceandinterestcostcomponentsofnetperiodicpostretirementhealthcarebenefitcosts? — — —

(b)Theaccumulatedpostretirementbenefitobligation(APBO)forhealthcarebenefits?(Forpurposesofthisdisclosure,allotherassumptionsshallbeheldconstant,andtheeffectsshallbemeasuredbasedonthesubstantiveplanthatisthebasisfortheaccounting.) — — —

(14)Ifapplicable,theamountsandtypesofsecuritiesoftheemployerandrelatedpartiesincludedinplanassets,theapproximateamountoffutureannualbenefitsofplanparticipantscoveredbyinsurancecontractsissuedbytheemployerorrelatedparties,andanysignificanttransactionsbetweentheemployerorrelatedpartiesandtheplanduringtheperiod?[Statement132(R).5(n)] — — —

(15)Ifapplicable,anyalternativemethodusedtoamortizepriorserviceamountsorunrecognizednetgainsandlossespursuanttoparagraphs26and33ofStatement87orparagraphs53and60ofStatement106?[Statement132(R).5(o)] — — —

(16)Ifapplicable,anysubstantivecommitment,suchaspastpracticeorahistoryofregularbenefitincreases,usedasthebasisforaccountingforthebenefitobligation?[Statement132(R).5(p)] — — —

(17)Ifapplicable,thecostofprovidingspecialorcontractualterminationbenefitsrecognizedduringtheperiodandadescriptionofthenatureoftheevent?[Statement132(R).5(q)] — — —


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(18)AnexplanationofanysignificantchangeinthebenefitobligationorplanassetsnototherwiseapparentintheotherdisclosuresrequiredbyStatement132(R)?[Statement132(R).5(r)] — — —

(19)Ifapplicable,theexistenceandnatureofsubstantivecommitmentsforfutureincreasesinnonpay-relatedbenefitsorbenefitsunderacareer-average-payplan,wherethesubstanceoftheplanistoprovidebenefitsattributabletopriorservicethataregreaterthanthebenefitsdefinedbythewrittenformsoftheplan?[Statement87.41] — — —

3.ReducedAnnualDisclosureRequirementsforNonpublicEntities


(1)Theamountsrelatedtotheemployer’sresultsofoperationsdisclosedforeachperiodforwhichastatementofincomeispresented?[Statement132(R).8] — — —


(3)Thebenefitobligation,fairvalueofplanassets,andfundedstatusoftheplan?[Statement132(R).8(a)] — — —

(4)Employercontributions,participantcontributions,andbenefitspaid?[Statement132(R).8(b)] — — —

(5)Informationaboutplanassets:[Statement132(R).8(c)]


(b)Anarrativedescriptionofinvestmentpoliciesandstrategies,includingtargetallocationpercentagesorrangeofpercentagesforeachmajorcategoryofplanassetspresentedonaweighted-averagebasisasofthemeasurementdate(s)ofthelateststatementoffinancialpositionpresented,ifapplicable,andotherfactorsthatarepertinenttoanunderstandingofthepoliciesorstrategiessuchasinvestmentgoals,riskmanagementpractices,permittedandprohibitedinvestmentsincludingtheuseofderivatives,diversification,andtherelationshipbetweenplanassetsandbenefitobligations? — — —


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(c)Anarrativedescriptionofthebasisusedtodeterminetheoverallexpectedlong-termrateofreturnonassetsassumption,suchasthegeneralapproachused,theextenttowhichtheoverallrateofreturnassumptionwasbasedonhistoricalreturnsandtheextenttowhichadjustmentsweremadetothosehistoricalreturns,inordertoreflectexpectationsoffuturereturnsandhowthoseadjustmentsweredetermined? — — —


(6)Fordefinedbenefitpensionplans,theABO?[Statement132(R).8(d)] — — —

(7)Thebenefits(asofthedateofthelateststatementoffinancialpositionpresented),expectedtobepaidineachofthenextfiveyears,andintheaggregateforthenextsucceedingfiveyears?Theexpectedbenefitsshouldbeestimatedbasedonthesameassumptionsusedtomeasurethecompany’sbenefitobligationattheendoftheyearandshouldincludeestimatedfutureemployeeservice.[Statement132(R).8(e)] — — —

(8)Theemployer’sbestestimate,assoonasitcanbereasonablydetermined,ofcontributionsexpectedtobepaidtotheplanduringthenextfiscalyearbeginningafterthedateofthelateststatementoffinancialposition?Estimatedcontributionsmaybepresentedintheaggregatecombining(1)contributionsrequiredbyfundingregulationsorlaws,(2)discretionarycontributions,and(3)noncashcontributions.[Statement132(R).8(f)] — — —

(9)Theamountsrecognizedinthestatementsoffinancialposition,includingnetpensionandotherpostretirementbenefitprepaidassetsoraccruedliabilitiesandanyintangibleassetandtheamountofAOCIrecognizedpursuanttoparagraph37ofStatement87,asamended?[Statement132(R).8(g)] — — —

(10)TheamountofnetperiodicbenefitcostrecognizedandtheamountincludedwithinOCIarisingfromachangeintheminimumpensionliabilityrecognizedpursuanttoparagraph37ofStatement87,asamended?[Statement132(R).8(h)] — — —

(11)Onaweighted-averagebasis,thefollowingassumptionsusedintheaccountingfortheplans,specifying,intabularformat,theassumptionsusedtodeterminethebenefitobligationandtheassumptionsusedtodeterminenetbenefitcost:[Statement132(R).8(i)]




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(12)Themeasurementdate(s)usedtodeterminepensionandotherpostretirementbenefitmeasurementsforthepensionplansandotherpostretirementbenefitplansthatmakeupatleastthemajorityofplanassetsandbenefitobligations?[Statement132(R).8(j)] — — —

(13)Theassumedhealthcarecosttrendrate(s)forthenextyearusedtomeasuretheexpectedcostofbenefitscoveredbytheplan(grosseligiblecharges),andageneraldescriptionofthedirectionandpatternofchangeintheassumedtrendratesthereafter,togetherwiththeultimatetrendrate(s)andwhenthatrateisexpectedtobeachieved?[Statement132(R).8(k)] — — —

(14)Ifapplicable,theamountsandtypesofsecuritiesoftheemployerandrelatedpartiesincludedinplanassets,theapproximateamountoffutureannualbenefitsofplanparticipantscoveredbyinsurancecontractsissuedbytheemployerorrelatedparties,andanysignificanttransactionsbetweentheemployerorrelatedpartiesandtheplanduringtheperiod?[Statement132(R).8(l)] — — —

(15)Thenatureandeffectofsignificantnonroutineevents,suchasamendments,combinations,divestitures,curtailments,andsettlements?[Statement132(R).8(m)] — — —

4.EmployersWithTwoorMorePlans—PublicandNonpublicEntities

a.Havedisclosuresrequiredbeenaggregatedforallofanemployer’sdefinedbenefitpensionplansandforallofanemployer’sotherdefinedbenefitpostretirementplansunlessdisaggregatingingroupsisconsideredtoprovideusefulinformationorisotherwiserequiredbyparagraphs6and7ofStatement132(R)?[Statement132(R).6] — — —

b.Aredisclosuresasofthemeasurementdateforeachstatementoffinancialpositionpresented?[Statement132(R).6] — — —

c.Aredisclosuresofamountsrecognizedinthestatementoffinancialpositionbeenpresentedseparatelyforprepaidbenefitcostsandaccruedbenefitliabilities?[Statement132(R).6] — — —

d.Ifaggregateddisclosuresarepresented,isthefollowingdisclosed:

(1)Theaggregatebenefitobligationandaggregatefairvalueofplanassetsforplanswithbenefitobligationsinexcessofplanassetsasofthemeasurementdateofeachstatementoffinancialpositionpresented?[Statement132(R).6(a)] — — —

(2)TheaggregatepensionABOandaggregatefairvalueofplanassetsforpensionplanswithABOsinexcessofplanassets?[Statement132(R).6(b)] — — —

5.EmployersWithForeignPlans—PublicandNonpublicEntities


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a.IfthebenefitobligationsofU.S.andforeignplansusesignificantlydifferentassumptions,havedisclosuresbeenmadeseparatelyforboththeU.S.andforeignplans?[Statement132(R).7] — — —

b.IfaforeignreportingentitythatpreparesfinancialstatementsinconformitywithU.S.generallyacceptedaccountingprinciples(GAAP),diditapplytheprecedingguidancetoitsdomesticandforeignplans?[Statement132(R).7] — — —

6.PostretirementMedicalPlans—PublicandNonpublicEntities

a.ForpostretirementmedicalplansthathaveprescriptiondrugbenefitsaffectedbytheMedicarePrescriptionDrug,Improvement,andModernizationAct(the“Act”),havethefollowingbeendisclosed:[FSPFAS106-2]

(1)IfadeterminationcannotbemadeastowhetherthemedicalbenefitsprovidedbyapostretirementbenefitplanareactuariallyequivalenttothoseprovidedbytheAct,isthefollowingdisclosedinfinancialstatementsforinterimorannualperiods:[FSPFAS106-2.20]

(a)TheexistenceoftheAct?[FSPFAS106-2.20(a)] — — —

(b)ThefactthatmeasuresoftheAPBOornetperiodicpostretirementbenefitcostdonotreflectanyamountassociatedwiththesubsidybecausetheemployerisunabletoconcludewhetherthebenefitsprovidedbytheplanareactuariallyequivalenttoMedicarePartDundertheAct?[FSPFAS106-2.20(b)] — — —

(2)Ifadeterminationcanbemadeastowhethermedicalbenefitsprovidedbyapostretirementbenefitplanareactuariallyequivalent,forthefirstinterimandannualperiodsthatincludestheeffectsofthesubsidyinmeasuringtheAPBOandthefirstperiodinwhichtheeffectsofthesubsidyinmeasuringnetperiodicpostretirementbenefitcostisincluded,isthefollowingdisclosed:[FSPFAS106-2.21]

(a)ThereductionintheAPBOforthesubsidyrelatedtobenefitsattributedtopastservice?[FSPFAS106-2.21(a)] — — —

(b)Theeffectofthesubsidyonthemeasurementofnetperiodicpostretirementbenefitcostforthecurrentperiod?Thateffectincludes(1)anyamortizationoftheactuarialexperiencegainin(a)asacomponentofthenetamortizationcalledforbyparagraph59ofStatement106,(2)thereductionincurrentperiodservicecostduetothesubsidy,and(3)theresultingreductionininterestcostontheAPBOasaresultofthesubsidy.[FSPFAS106-2.21(b)] — — —


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(c)Anyotherdisclosuresrequiredbyparagraph5(r)ofStatement132(R).Paragraph5(r)ofthatStatementrequiresdisclosureof“anexplanationofanysignificantchangeinthebenefitobligationorplanassetsnototherwiseapparentintheotherdisclosuresrequiredbythisStatement.”[FSPFAS106-2.21(c)] — — —

(3)Forpurposesofthedisclosuresrequiredbyparagraphs5(a)and5(f)ofStatement132(R),doesthedisclosureincludethegrossbenefitpayments(paidandexpected,respectively),includingprescriptiondrugbenefits,andseparatelythegrossamountofthesubsidyreceipts(receivedandexpected,respectively)?[FSPFAS106-2.22] — — —

7.DefinedContributionPlans—PublicandNonpublicEntities

a.Foradefinedcontributionplan,havethefollowingbeendisclosed:

(1)Theamountofcostrecognizedfordefinedcontributionpensionplansorotherpostretirementbenefitplansforallperiodspresentedseparatelyfromtheamountofcostrecognizedfordefinedbenefitplans?[Statement132(R).11] — — —

(2)Adescriptionofthenatureandeffectofanysignificantchangesduringtheperiodaffectingcomparability,suchasachangeintherateofemployercontributions,abusinesscombination,oradivestiture?[Statement132(R).11] — — —

(3)Ifthesubstanceoftheplanistoprovideadefinedbenefit,doestheaccountingconformtotherequirementsfordefinedbenefitplanswithdisclosuresinaccordancewithparagraphs5and8ofStatement132(R)?[Statement87.66] — — —

8.MultiemployerPlans—PublicandNonpublicEntities

a.Formultiemployerplans,havethefollowingbeendisclosed:

(1)Theamountofcontributionstomultiemployerplansforeachannualperiodforwhichanincomestatementispresented?[Statement132(R).12] — — —

(2)Totalcontributionstomultiemployerplanswithoutdisaggregatingtheamountsattributabletopensionplansandotherpostretirementbenefitplans?[Statement132(R).12] — — —

(3)Adescriptionofthenatureandeffectofanychangesaffectingcomparability,suchasachangeintherateofemployercontributions,abusinesscombination,oradivestiture?[Statement132(R).12] — — —

(4)Ifwithdrawalfromamultiemployerplanhasoccurredhasthefollowingbeendisclosed:[Statement132(R).13]


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(a)Ifthereisanobligationtotheplanforaportionofthepensionplan’sandotherpostretirementbenefitplan’sunfundedbenefitobligationsthatiseitherprobableorreasonablypossibledidtheemployerapplytheprovisionsofFASBStatementNo.5,AccountingforContingencies?[Statement87.70] — — —

(b)Ifitiseitherprobableorreasonablypossiblethat(a)anemployerwouldwithdrawfromtheplanundercircumstancesthatwouldgiverisetoanobligationor(b)anemployer’scontributiontothefundwouldbeincreasedduringtheremainderofthecontractperiodtomakeupashortfallinthefundsnecessarytomaintainthenegotiatedlevelofbenefitcoverage(a“maintenanceofbenefits”clause),didtheemployerapplytheprovisionsofStatement5?[Statement106.83]

— — —

9.InterimDisclosures—PublicandNonpublicEntities

a.Forapubliclytradedentitythefollowinginformationinitsinterimfinancialstatementsthatincludeastatementofincome:[Statement132(R).9(a)]

(1)Theamountofnetperiodicbenefitcostrecognized,foreachperiodinwhichastatementofincomeispresented,showingseparately:[Statement132(R).9(a)]




(d)Amortizationoftheunrecognizedtransitionobligationortransitionasset? — — —

(e)Theamountofrecognizedgainsorlosses? — — —

(f)Theamountofpriorservicecostrecognized? — — —

(g)Theamountofgainorlossrecognizedduetoasettlementorcurtailment? — — —

(2)Thetotalamountofemployer’scontributionpaid,andexpectedtobepaidduringthecurrentfiscalyear,ifsignificantlydifferentfromamountspreviouslydisclosedpursuanttoparagraph5(g)ofStatement132(R)?Estimatedcontributionsmaybepresentedintheaggregatecombining(1)contributionsrequiredbyfundingregulationsorlaws,(2)discretionarycontributions,and(3)noncashcontributions.[Statement132(R).9(b)] — — —


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b.Foranonpublicentity,forinterimperiods,forwhichacompletesetoffinancialstatementsispresented,thetotalamountofemployer’scontributionspaidandexpectedtobepaidduringthecurrentfiscalyear,ifsignificantlydifferentfrompreviousdisclosurespursuanttoparagraph8(f)ofStatement132(R)?Estimatedcontributionsmaybepresentedintheaggregate,combining(a)contributionsrequiredbyfundingregulationsorlaws,(b)discretionarycontributions,and(c)noncashcontributions.[Statement132(R).10] — — —

10.DisclosuresRequiredPriortotheAdoptionoftheRecognitionProvisionsofStatement158—EntitiesWithoutPubliclyTradedEquitySecurities

a.HasanentitywithoutpubliclytradedequitysecuritiesdisclosedthefollowinginthenotestothefinancialstatementsforafiscalyearendingafterDecember15,2006,butbeforeJune16,2007,unlessithasappliedtherecognitionprovisionsofStatement158inpreparingthosefinancialstatements:[Statement158.14]

(1)AbriefdescriptionoftheprovisionsofStatement158? — — —

(2)Thedatethatadoptionisrequired? — — —

(3)ThedatetheemployerplanstoadopttherecognitionprovisionsofStatement158,ifearlier? — — —


Section II

1.AnnualDisclosures—PublicandNonpublicEntities

a.Havethedisclosuresforearlierannualperiodspresentedforcomparativepurposesbeenrestatedfor:[Statement132(R).20]

(1)Thepercentageofeachmajorcategoryofplanassetsheld? — — —

(2)TheABO? — — —

(3)Theassumptionsusedintheaccountingfortheplans? — — —

2.AnnualDisclosures—PublicEntities

a.Ifanemployersponsorsoneormoredefinedbenefitpensionplansoroneormoreotherdefinedbenefitpostretirementplans,hasthefollowinginformationbeenprovidedseparatelyforpensionplansandotherpostretirementbenefitplans;[Statement132(R).5]

(1)Theamountsrelatedtotheemployer’sresultsofoperations(includingitemsofOCI)disclosedforeachperiodforwhichastatementofincomeispresented?[Statement158.E1(b),Statement132(R).5] — — —

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[NotethatoncethemeasurementdateprovisionsofStatement158havebeenadopted(whichareeffectiveforfiscalyearsendingafterDecember15,2008,forallentities),themeasurementdatewillbethesameasthedateoftheyear-endstatementoffinancialposition.][Statement158.E1(b),Statement132(R).5]

b.Havethefollowingdisclosuresbeenmade:

(1)Areconciliationofbeginningandendingbalancesofthebenefitobligationshowingseparately,ifapplicable,theeffectsduringtheperiodattributabletoeachofthefollowing:[Statement132(R).5(a)]

(a)Servicecost? — — —

(b)Interestcost? — — —

(c)Contributionsbyplanparticipants? — — —

(d)Actuarialgainsandlosses? — — —

(e)Foreigncurrencyexchangeratechanges? — — —

(f )Benefitspaid? — — —

(g)Planamendments? — — —

(h)Businesscombinations? — — —

( i )Divestitures? — — —

( j ) Curtailments? — — —

(k)Settlements? — — —

( l ) Specialterminationbenefits? — — —

(2)Areconciliationofbeginningandendingbalancesofthefairvalueofplanassetsshowingseparately,ifapplicable,theeffectsduringtheperiodattributabletoeachofthefollowing:[Statement132(R).5(b)]

(a)Actualreturnonplanassets? — — —

(b)Foreigncurrencyexchangeratechanges? — — —

(c)Contributionsbytheemployer? — — —

(d)Contributionsbyplanparticipants? — — —

(e)Benefitspaid? — — —

(f) Businesscombinations? — — —

(g)Divestitures? — — —

(h)Settlements? — — —


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(3)Thefundedstatusoftheplansandtheamountsrecognizedinthestatementoffinancialposition,showingseparatelytheassetsandcurrentandnoncurrentliabilitiesrecognized?[Statement158.E1(c),Statement132(R).5(c)] — — —

(4)Informationaboutplanassets:[Statement132(R).5(d)]


(b)Anarrativedescriptionofinvestmentpoliciesandstrategies,includingtargetallocationpercentagesorrangeofpercentagesforeachmajorcategoryofplanassetspresentedonaweighted-averagebasisasofthemeasurementdateofthelateststatementoffinancialpositionpresented(ifapplicable),andotherpertinentfactorssuchasinvestmentgoals,riskmanagementpractices,allowableandprohibitedinvestmenttypesincludingtheuseofderivatives,diversification,andtherelationshipbetweenplanassetsandbenefitobligations? — — —

(c)Anarrativedescriptionofthebasisusedtodeterminetheoverallexpectedlong-termrate-of-returnonassetsassumption,suchasthegeneralapproachused,theextenttowhichtheoverallrate-of-returnonassetsassumptionwasbasedonhistoricalreturns,theextenttowhichadjustmentsweremadetothosehistoricalreturnsinordertoreflectexpectationsoffuturereturns,andhowthoseadjustmentsweredetermined? — — —


(5)Fordefinedbenefitpensionplans,theABO?[Statement132(R).5(e)] — — —

(6)Thebenefits(asofthedateofthelateststatementoffinancialpositionpresented)expectedtobepaidineachofthenextfiveyears,andintheaggregateforthenextsucceedingfiveyears?Theexpectedbenefitsshouldbeestimatedbasedonthesameassumptionsusedtomeasurethecompany’sbenefitobligationattheendoftheyearandshouldincludeestimatedfutureemployeeservice.[Statement132(R).5(f)] — — —

(7)Theemployer’sbestestimate,assoonasitcanbereasonablydetermined,ofcontributionsexpectedtobepaidtotheplanduringthenextfiscalyearbeginningafterthedateofthelateststatementoffinancialposition?Estimatedcontributionsmaybepresentedintheaggregatecombining(1)contributionsrequiredbyfundingregulationsorlaws,(2)discretionarycontributions,and(3)noncashcontributions.[Statement132(R).5(g)] — — —


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(8)Theamountofnetperiodicbenefitcostrecognized,showingseparately:[Statement158.E1(d),Statement132(R).5(h)]




(d)Gainorlosscomponent? — — —

(e)Priorservicecostorcreditcomponent? — — —

( f ) Transitionassetorobligationcomponent? — — —

(g)Gainorlossrecognizedduetosettlementsorcurtailments? — — —

(9)Separately,thenetgainorlossandnetpriorservicecostorcreditrecognizedinOCIfortheperiodpursuanttoparagraphs25and29ofStatement87andparagraphs52and56ofStatement106,asamended,andreclassificationadjustmentsofOCIfortheperiod,asthoseamounts,includingamortizationofthenettransitionassetorobligation,arerecognizedascomponentsofnetperiodicbenefitcost?[Statement158.7(a)and(b),Statement158.E1(e),Statement132(R).5(i)] — — —

(10)TheamountsinAOCIthathavenotyetbeenrecognizedascomponentsofnetperiodicbenefitcost,showingseparatelythenetgainorloss,netpriorservicecostorcredit,andnettransitionassetorobligation?[Statement158.7(c),Statement158.E1(f),Statement132(R).5(ii)] — — —

(11)Onaweighted-averagebasis,thefollowingassumptionsusedintheaccountingfortheplans,specifying,intabularformat,theassumptionsusedtodeterminethebenefitobligationandtheassumptionsusedtodeterminenetbenefitcost:[Statement132(R).5(j)]




(12)Themeasurementdate(s)usedtodeterminepensionandotherpostretirementbenefitmeasurementsforthepensionplansandotherpostretirementbenefitplansthatmakeupatleastthemajorityofplanassetsandbenefitobligations?[NotethatthisdisclosurewillnolongerberequiredwhenthemeasurementdateprovisionsofStatement158havebeenadopted,whichwillbeeffectiveforfiscalyearsendingafterDecember15,2008.][Statement158.E1(g),Statement132(R).5(k)] — — —

(13)Theassumedhealthcarecosttrendrate(s)forthenextyearusedtomeasuretheexpectedcostofbenefitscoveredbytheplan(grosseligiblecharges),andageneraldescriptionofthedirectionandpatternofchangeintheassumedtrendratesthereafter,togetherwiththeultimatetrendrate(s)andwhenthatrateisexpectedtobeachieved?[Statement132(R).5(l)] — — —


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(14)Theeffectofaone-percentage-pointincreaseandtheeffectofaone-percentage-pointdecreaseintheassumedhealthcarecosttrendrateson:[Statement132(R).5(m)]

(a)Theaggregateoftheserviceandinterestcostcomponentsofnetperiodicpostretirementhealthcarebenefitcosts? — — —

(b)TheAPBOforhealthcarebenefits?(Forpurposesofthisdisclosure,allotherassumptionsshallbeheldconstant,andtheeffectsshallbemeasuredbasedonthesubstantiveplanthatisthebasisfortheaccounting.) — — —

(15)Ifapplicable,theamountsandtypesofsecuritiesoftheemployerandrelatedpartiesincludedinplanassets,theapproximateamountoffutureannualbenefitsofplanparticipantscoveredbyinsurancecontractsissuedbytheemployerorrelatedparties,andanysignificanttransactionsbetweentheemployerorrelatedpartiesandtheplanduringtheperiod?[Statement132(R).5(n)] — — —

(16)Ifapplicable,anyalternativemethodusedtoamortizepriorserviceamountsornetgainsandlossespursuanttoparagraphs26and33ofStatement87orparagraphs53and60ofStatement106?[Statement158.E1(h),Statement132(R).5(o)] — — —

(17)Ifapplicable,anysubstantivecommitment,suchaspastpracticeorahistoryofregularbenefitincreases,usedasthebasisforaccountingforthebenefitobligation?[Statement132(R).5(p)] — — —

(18)Ifapplicable,thecostofprovidingspecialorcontractualterminationbenefitsrecognizedduringtheperiodandadescriptionofthenatureoftheevent?[Statement132(R).5(q)] — — —

(19)AnexplanationofanysignificantchangeinthebenefitobligationorplanassetsnototherwiseapparentintheotherdisclosuresrequiredbyStatement132(R)?[Statement132(R).5(r)] — — —

(20)TheamountsinAOCIexpectedtoberecognizedascomponentsofnetperiodicbenefitcostoverthefiscalyearthatfollowsthemostrecentannualstatementoffinancialpositionpresented,showingseparatelythenetgainorloss,netpriorservicecostorcredit,andnettransitionassetorobligation?[Statement158.7(d),Statement158.E1(i),Statement132(R).5(s)] — — —

(21)Theamountandtimingofanyplanassetsexpectedtobereturnedtotheemployerduringthe12-monthperiod,oroperatingcycleiflonger,thatfollowsthemostrecentannualstatementoffinancialpositionpresented.[Statement158.7(e),Statement158.E1(j),Statement132(R).5(t)] — — —

(22)Ifapplicable,theexistenceandnatureofsubstantivecommitmentsforfutureincreasesinnonpay-relatedbenefitsorbenefitsunderacareer-average-payplan,wherethesubstanceoftheplanistoprovidebenefitsattributabletopriorservicethataregreaterthanthebenefitsdefinedbythewrittenformsoftheplan?[Statement87.41] — — —


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3.ReducedAnnualDisclosureRequirementsforNonpublicEntities


(1)Theamountsrelatedtotheemployer’sresultsofoperations(includingitemsofOCI)disclosedforeachperiodforwhichastatementofincomeispresented?[Statement158.E1(l),Statement132(R).8] — — —

(2)Theamountsrelatedtotheemployer’sstatementoffinancialposition,disclosedasofthemeasurementdateusedforeachstatementoffinancialpositionpresented?[NotethatoncethemeasurementdateprovisionsofStatement158havebeenadopted,whichareeffectiveforfiscalyearsendingafterDecember15,2008,theabovedisclosureshouldbeasofthedateofeachfinancialstatementpresented.][Statement158.E1(l),Statement132(R).8] — — —

(3)Thebenefitobligation,fairvalueofplanassets,andfundedstatusoftheplan?[Statement132(R).8(a)] — — —

(4)Employercontributions,participantcontributions,andbenefitspaid?[Statement132(R).8(b)] — — —

(5)Informationaboutplanassets:[Statement132(R).8(c)]


(b)Anarrativedescriptionofinvestmentpoliciesandstrategies,includingtargetallocationpercentagesorrangeofpercentagesforeachmajorcategoryofplanassetspresentedonaweighted-averagebasisasofthemeasurementdate(s)ofthelateststatementoffinancialpositionpresented,ifapplicable,andotherfactorsthatarepertinenttoanunderstandingofthepoliciesorstrategiessuchasinvestmentgoals,riskmanagementpractices,permittedandprohibitedinvestmentsincludingtheuseofderivatives,diversification,andtherelationshipbetweenplanassetsandbenefitobligations? — — —

(c)Anarrativedescriptionofthebasisusedtodeterminetheoverallexpectedlong-termrateofreturnonassetsassumption,suchasthegeneralapproachused,theextenttowhichtheoverallrateofreturnassumptionwasbasedonhistoricalreturnsandtheextenttowhichadjustmentsweremadetothosehistoricalreturns,inordertoreflectexpectationsoffuturereturnsandhowthoseadjustmentsweredetermined? — — —


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(6)Fordefinedbenefitpensionplans,theABO?[Statement132(R).8(d)] — — —

(7)Thebenefits(asofthedateofthelateststatementoffinancialpositionpresented),expectedtobepaidineachofthenextfiveyears,andintheaggregateforthenextsucceedingfiveyears?Theexpectedbenefitsshouldbeestimatedbasedonthesameassumptionsusedtomeasurethecompany’sbenefitobligationattheendoftheyearandshouldincludeestimatedfutureemployeeservice.[Statement132(R).8(e)] — — —

(8)Theemployer’sbestestimate,assoonasitcanbereasonablydetermined,ofcontributionsexpectedtobepaidtotheplanduringthenextfiscalyearbeginningafterthedateofthelateststatementoffinancialposition?Estimatedcontributionsmaybepresentedintheaggregatecombining(1)contributionsrequiredbyfundingregulationsorlaws,(2)discretionarycontributions,and(3)noncashcontributions.[Statement132(R).8(f)] — — —

(9)Theamountsrecognizedinthestatementsoffinancialposition,showingseparatelythepostretirementbenefitassetsandcurrentandnoncurrentpostretirementbenefitliabilities?[Statement158.E1(m),Statement132(R).8(g)] — — —

(10)Separately,thenetgainorlossandnetpriorservicecostorcreditrecognizedinOCIfortheperiodpursuanttoparagraphs25and29ofStatement87andparagraphs52and56ofStatement106,asamended,andreclassificationadjustmentsofOCIfortheperiod,asthoseamounts,includingamortizationofthenettransitionassetorobligation,arerecognizedascomponentsofnetperiodicbenefitcost?[Statement158.7(a)and(b),Statement158.E1(n),Statement132(R).8(h)] — — —

(11)TheamountsinAOCIthathavenotyetbeenrecognizedascomponentsofnetperiodicbenefitcost,showingseparatelythenetgainorloss,netpriorservicecostorcredit,andnettransitionassetorobligation?[Statement158.7(c),Statement158.E1(o),Statement132(R).8(hh)] — — —

(12)Onaweighted-averagebasis,thefollowingassumptionsusedintheaccountingfortheplans,specifying,intabularformat,theassumptionsusedtodeterminethebenefitobligationandtheassumptionsusedtodeterminenetbenefitcost:[Statement132(R).8(i)]




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(13)Themeasurementdate(s)usedtodeterminepensionandotherpostretirementbenefitmeasurementsforthepensionplansandotherpostretirementbenefitplansthatmakeupatleastthemajorityofplanassetsandbenefitobligations?[NotethatthisdisclosurewillnolongerberequiredwhenthemeasurementdateprovisionsofStatement158havebeenadopted,whichwillbeeffectiveforfiscalyearsendingafterDecember15,2008.][Statement158.E1(p),Statement132(R).8(j)] — — —

(14)Theassumedhealthcarecosttrendrate(s)forthenextyearusedtomeasuretheexpectedcostofbenefitscoveredbytheplan(grosseligiblecharges),andageneraldescriptionofthedirectionandpatternofchangeintheassumedtrendratesthereafter,togetherwiththeultimatetrendrate(s)andwhenthatrateisexpectedtobeachieved?[Statement132(R).8(k)] — — —

(15)Ifapplicable,theamountsandtypesofsecuritiesoftheemployerandrelatedpartiesincludedinplanassets,theapproximateamountoffutureannualbenefitsofplanparticipantscoveredbyinsurancecontractsissuedbytheemployerorrelatedparties,andanysignificanttransactionsbetweentheemployerorrelatedpartiesandtheplanduringtheperiod?[Statement132(R).8(l)] — — —

(16)Thenatureandeffectofsignificantnonroutineevents,suchasamendments,combinations,divestitures,curtailments,andsettlements?[Statement132(R).8(m)] — — —

(17)TheamountsinAOCIexpectedtoberecognizedascomponentsofnetperiodicbenefitcostoverthefiscalyearthatfollowsthemostrecentannualstatementoffinancialpositionpresented,showingseparatelythenetgainorloss,netpriorservicecostorcredit,andnettransitionassetorobligation?[Statement158.7(d),Statement158.E1(q),Statement132(R).8(n)] — — —

(18)Theamountandtimingofanyplanassetsexpectedtobereturnedtotheemployerduringthe12-monthperiod,oroperatingcycleiflonger,thatfollowsthemostrecentannualstatementoffinancialpositionpresented?[Statement158.7(e),Statement158.E1(r),Statement132(R).8(o)] — — —

4.EmployersWithTwoorMorePlans—PublicandNonpublicEntities

a.Havedisclosuresrequiredbeenaggregatedforallofanemployer’sdefinedbenefitpensionplansandforallofanemployer’sotherdefinedbenefitpostretirementplansunlessdisaggregatingingroupsisconsideredtoprovideusefulinformationorisotherwiserequiredbyparagraphs6and7ofStatement132(R)?[Statement132(R).6] — — —

b.Aredisclosuresasofthemeasurementdateforeachstatementoffinancialpositionpresented? — — —


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[NotethatoncethemeasurementdateprovisionsofStatement158havebeenadopted,whichareeffectiveforfiscalyearsendingafterDecember15,2008,thedisclosuresshouldbeasofthedateofeachstatementoffinancialpositionpresented.][Statement158.E1(k),Statement132(R).6] — — —

c.Ifaggregateddisclosuresarepresented,isthefollowingdisclosed:

(1)Theaggregatebenefitobligationandaggregatefairvalueofplanassetsforplanswithbenefitobligationsinexcessofplanassetsasofthemeasurementdateofeachstatementoffinancialpositionpresented?[Statement132(R).6(a)] — — —

(2)TheaggregatepensionABOandaggregatefairvalueofplanassetsforpensionplanswithABOsinexcessofplanassets?[Statement132(R).6(b)] — — —

5.EmployersWithForeignPlans—PublicandNonpublicEntities

a.IfthebenefitobligationsofU.S.andforeignplansusesignificantlydifferentassumptions,havedisclosuresbeenmadeseparatelyforboththeU.S.andforeignplans?[Statement132(R).7] — — —

b.IfaforeignreportingentitythatpreparesfinancialstatementsinconformitywithU.S.generallyacceptedaccountingprinciples(GAAP),diditapplytheprecedingguidancetoitsdomesticandforeignplans?[Statement132(R).7] — — —

6.PostretirementMedicalPlans—PublicandNonpublicEntities

a.ForpostretirementmedicalplansthathaveprescriptiondrugbenefitsaffectedbytheMedicarePrescriptionDrug,ImprovementandModernizationAct(the“Act”)havethefollowingbeendisclosed:[FSPFAS106-2]

(1)IfadeterminationcannotbemadeastowhetherthemedicalbenefitsprovidedbyapostretirementbenefitplanareactuariallyequivalenttothoseprovidedbytheAct,isthefollowingdisclosedinfinancialstatementsforinterimorannualperiods:[FSPFAS106-2.20]

(a)TheexistenceoftheAct?[FSPFAS106-2.20(a)] — — —

(b)ThefactthatmeasuresoftheAPBOornetperiodicpostretirementbenefitcostdonotreflectanyamountassociatedwiththesubsidybecausetheemployerisunabletoconcludewhetherthebenefitsprovidedbytheplanareactuariallyequivalenttoMedicarePartDundertheAct?[FSPFAS106-2.20(b)] — — —

(2)Ifadeterminationcanbemadeastowhethermedicalbenefitsprovidedbyapostretirementbenefitplanareactuariallyequivalent,forthefirstinterimandannualperiodsthatincludestheeffectsofthesubsidyinmeasuringtheAPBOandthefirstperiodinwhichtheeffectsofthesubsidyinmeasuringnetperiodicpostretirementbenefitcostisincluded,isthefollowingdisclosed:[FSPFAS106-2.21]


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(b)Theeffectofthesubsidyonthemeasurementofnetperiodicpostretirementbenefitcostforthecurrentperiod?Thateffectincludes(1)anyamortizationoftheactuarialexperiencegainin(a)asacomponentofthenetamortizationcalledforbyparagraph59ofStatement106,(2)thereductionincurrentperiodservicecostduetothesubsidy,and(3)theresultingreductionininterestcostontheAPBOasaresultofthesubsidy.[FSPFAS106-2.21(b)] — — —

(c)Anyotherdisclosuresrequiredbyparagraph5(r)ofStatement132(R)?Paragraph5(r)ofStatement132(R)requiresdisclosureof“anexplanationofanysignificantchangeinthebenefitobligationorplanassetsnototherwiseapparentintheotherdisclosuresrequiredbythisStatement.”[FSPFAS106-2.21(c)] — — —

(3)Forpurposesofthedisclosuresrequiredbyparagraphs5(a)and5(f)ofStatement132(R),doesthedisclosureincludethegrossbenefitpayments(paidandexpected,respectively),includingprescriptiondrugbenefits,andseparatelythegrossamountofthesubsidyreceipts(receivedandexpected,respectively)?[FSPFAS106-2.22] — — —

7.DefinedContributionPlans—PublicandNonpublicEntities

a.Foradefinedcontributionplan,havethefollowingbeendisclosed:

(1)Theamountofcostrecognizedfordefinedcontributionpensionplansorotherpostretirementbenefitplansforallperiodspresentedseparatelyfromtheamountofcostrecognizedfordefinedbenefitplans?[Statement132(R).11] — — —

(2)Adescriptionofthenatureandeffectofanysignificantchangesduringtheperiodaffectingcomparability,suchasachangeintherateofemployercontributions,abusinesscombination,oradivestiture?[Statement132(R).11] — — —

(3)Ifthesubstanceoftheplanistoprovideadefinedbenefit,doestheaccountingconformtotherequirementsfordefinedbenefitplanswithdisclosuresinaccordancewithparagraphs5and8ofStatement132(R)?[Statement87.66] — — —

8.MultiemployerPlans—PublicandNonpublicEntities

a.Formultiemployerplans,havethefollowingbeendisclosed:

(1)Theamountofcontributionstomultiemployerplansforeachannualperiodforwhichanincomestatementispresented?[Statement132(R).12] — — —

(2)Totalcontributionstomultiemployerplanswithoutdisaggregatingtheamountsattributabletopensionplansandotherpostretirementbenefitplans?[Statement132(R).12] — — —

(3)Adescriptionofthenatureandeffectofanychangesaffectingcomparability,suchasachangeintherateofemployercontributions,abusinesscombination,oradivestiture?[Statement132(R).12] — — —


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(4)Ifwithdrawalfromamultiemployerplanhasoccurredhasthefollowingbeendisclosed:[Statement132(R).13]

(a)Ifthereisanobligationtotheplanforaportionofthepensionplan’sandotherpostretirementbenefitplan’sunfundedbenefitobligationsthatiseitherprobableorreasonablypossibledidtheemployerapplytheprovisionsofFASBStatementNo.5,AccountingforContingencies?[Statement87.70] — — —

(b)Ifitiseitherprobableorreasonablypossiblethat(a)anemployerwouldwithdrawfromtheplanundercircumstancesthatwouldgiverisetoanobligationor(b)anemployer’scontributiontothefundwouldbeincreasedduringtheremainderofthecontractperiodtomakeupashortfallinthefundsnecessarytomaintainthenegotiatedlevelofbenefitcoverage(a“maintenanceofbenefits”clause),didtheemployerapplytheprovisionsofStatement5?[Statement106.83] — — —

9.InterimDisclosures—PublicandNonpublicEntities

a.Forapubliclytradedentitythefollowinginformationinitsinterimfinancialstatementsthatincludeastatementofincome:[Statement132(R).9(a)]

(1)Theamountofnetperiodicbenefitcostrecognized,foreachperiodinwhichastatementofincomeispresented,showingseparately:[Statement158.E1(s),Statement132(R).9(a)]




(d)Gainorlosscomponent? — — —

(e)Priorservicecostorcreditcomponent? — — —

(f)Transitionassetorobligationcomponent? — — —

(g)Thegainorlossrecognizedduetoasettlementorcurtailment? — — —

(2)Thetotalamountofemployer’scontributionpaid,andexpectedtobepaidduringthecurrentfiscalyear,ifsignificantlydifferentfromamountspreviouslydisclosedpursuanttoparagraph5(g)ofStatement132(R)?Estimatedcontributionsmaybepresentedintheaggregatecombining(1)contributionsrequiredbyfundingregulationsorlaws,(2)discretionarycontributions,and(3)noncashcontributions.[Statement132(R).9(b)] — — —

b.Foranonpublicentity,forinterimperiods,forwhichacompletesetoffinancialstatementsispresented,thetotalamountofemployer’scontributionspaidandexpectedtobepaidduringthecurrentfiscalyear,ifsignificantlydifferentfrompreviousdisclosurespursuanttoparagraph8(f)ofStatement132(R)?Estimatedcontributionsmaybepresentedintheaggregate,combining(a)contributionsrequiredbyfundingregulationsorlaws,(b)discretionarycontributions,and(c)noncashcontributions. — — —


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10.PresentationandClassification—PublicandNonpublicEntities

a.Havealloverfundedplansbeenaggregatedandpresentedasasingleassetinthestatementoffinancialposition?[Statement158.4(b),.C2(k),.D2(d),Statement87.36,Statement106.44B] — — —

b.Ifaclassifiedstatementoffinancialpositionispresented,hastheassetforoverfundedplansbeenclassifiedasanoncurrentasset?[Statement158.4(b),.C2(k),D2(d),Statement87.36,Statement106.44B] — — —

c.Haveallunderfundedplansbeenaggregatedandpresentedasasingleliabilityinthestatementoffinancialposition?[Statement158.4(b),.C2(k),D2(d),Statement87.36,Statement106.44B] — — —

d.Ifaclassifiedstatementoffinancialpositionispresented,hastheliabilityforunderfundedplansbeenclassifiedasanoncurrentliability,excepttotheextentthattheactuarialpresentvalueofbenefitsincludedinthebenefitobligationpayableinthenext12months,oroperatingcycleiflonger,exceedsthefairvalueofplanassets,andinsuchcases,thatexcessisclassifiedasacurrentliability?[Statement158.4(b),.C2(k),D2(d),Statement87.36,Statement106.44B]. — — —

Postretirement Benefits Other Than Pensions




Section I

1.Ifthecompanyhasdeferredcompensationcontractswithindividualemployeesthat,takentogether,areequivalenttoapostretirementincomeplan,hasStatement87beenapplied?[Statement106.13] — — —


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2.Ifthecompanyhasdeferredcompensationcontractswithindividualemployeesthat,takentogether,areequivalenttoapostretirementhealthorwelfarebenefitplan,hasStatement106beenapplied?[Statement106.6,.9,.13] — — —

3.Ifthecompanyhasotherdeferredcompensationcontracts,iscompensationbeingaccruedsystematicallyovertheperiodtothefulleligibilitydate(i.e.,thedateatwhichanemployeehasrenderedalltheservicenecessarytohaveearnedtherighttoreceiveallofthebenefitsexpectedtobereceivedbythatemployee)resultinginanamountequaltothethenpresentvalueofthefuturebenefitsexpectedtobepaid?[Statement106.13] — — —


a.Theservicecostcomponentofpostretirementbenefitcost,anypriorservicecost,andtheAPBOaremeasuredusingpresentvaluetechniquesandusingactuarialassumptionsthatindividuallyreflectthebestestimateofeachassumption,assumingtheplanwillcontinueineffectintheabsenceofevidencethatitwillnotcontinue?[Statement106.30] — — —

b.Assumeddiscountratesreflectthetimevalueofmoneyasofthemeasurementdateindeterminingthepresentvalueoffuturecashoutflowscurrentlyexpectedtoberequiredtosatisfythepostretirementbenefitobligation?[Statement106.31] — — —

c.Theexpectedlong-termrateofreturnonplanassetsreflectstheaveragerateofearningsexpectedontheexistingassetsthatqualifyasplanassetsandcontributionstotheplanexpectedtobemadeduringtheperiod,includingtheincometaxeffectsofsuchreturns,ifany?[Statement106.32] — — —

d.TheservicecostcomponentofnetperiodicpostretirementbenefitcostandtheexpectedandAPBOsreflectfuturecompensationlevelstotheextentthatthepostretirementbenefitformuladefinesthebenefitswhollyorpartiallyasafunctionoffuturecompensationlevels?[Statement106.33] — — —

e.Forpay-relatedplans,assumedcompensationlevelsreflectthebestestimateoftheactualfuturecompensationlevelsoftheindividualemployeesinvolved,includingfuturechangesattributedtogeneralpricelevels,productivity,seniority,promotion,andotherfactors?[Statement106.33] — — —

f. Allassumptionsthatreflectexpectationsofthesamefutureeconomicconditions,suchasfutureratesofinflation,areconsistent?[Statement106.33] — — —

g.Doesmeasurementofanemployer’spostretirementhealthcareobligationincludetheuseofassumptionsaboutfactorsthatareuniquetohealthcarebenefitsandaffecttheamountandtimingoffuturebenefitpaymentsforpostretirementhealthcare,suchasconsiderationofhistoricalpercapitaclaimscostbyage,healthcarecosttrendrates(forplansthatprovideabenefitinkind),andmedicalcoveragetobepaidbygovernmentalauthoritiesandotherprovidersofhealthcarebenefits?[Statement106.34] — — —


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h.Istheemployer’sshareoftheexpectedfuturepostretirementhealthcarecost(aggregateassumednetincurredclaimscost)foraplanparticipantdevelopedbyreducingtheassumedpercapitaclaimscostbyeachofthefollowing:[Statement106.35]

(1)Ateachageatwhichtheplanparticipantisexpectedtoreceivebenefitsundertheplanby(a)theeffectsofcoveragebyMedicare,includingtheeffectsoftheMedicarePrescriptionDrug,ImprovementandModernizationAct(Act),andotherprovidersofhealthcarebenefits,and(b)theeffectsofthecost-sharingprovisionsoftheplan(deductibles,copaymentprovisions,out-of-pocketlimitations,capsonthelimitsoftheemployer-providedpayments,andretireecontributions)? — — —

(2)Theactuarialpresentvalueoftheplanparticipants’futurecontributionsifcontributionsarerequiredtobepaidbyactiveplanparticipantstowardtheirpostretirementhealthcarebenefits? — — —

i.Theassumedpercapitaclaimscostbyagerepresentsthebestestimateoftheexpectedfuturecostofthebenefitscoveredbytheplan?[Statement106.36] — — —

j.Pastandpresentclaimsdatafortheplanareusedindevelopingthecurrentpercapitaclaimscosttotheextentthatthosedataareconsideredtobeindicativeofthecurrentcostofprovidingthebenefitscoveredbytheplan?[Statement106.37] — — —

k.Thecurrentclaimsdataareadjustedbytheassumedhealthcarecosttrendrate?[Statement106.37] — — —

l.Intheabsenceofsufficientlyreliableplandataaboutthecurrentcostofthebenefitscoveredbytheplan,currentpercapitaclaimscostisbased,entirelyorinpart,ontheclaimsinformationofotheremployersadjustedtobestreflectthetermsoftheemployer’splanandtheplandemographics,totheextentthosecostsareindicativeofthecurrentcostofprovidingthebenefitscoveredbytheplan?[Statement106.38] — — —

m.Currentpercapitaclaimscostderivedfrominformationfromoutsidesources(e.g.,insurancecompanies,actuarialfirms,consultingfirms)hasbeenadjustedtobestreflectthetermsoftheemployer’splanandtheplandemographics?[Statement106.38] — — —

n.Bothpastandcurrenthealthcarecosttrendsareusedindevelopinganemployer’sassumedhealthcarecosttrendrates?[Statement106.39] — — —

o.Presentlyenactedchangesinthelaworamendmentsoftheplansofotherhealthcareprovidersthattakeeffectinfutureperiodsandthatwillaffectthefutureleveloftheirbenefitcoveragesareconsideredincurrent-periodmeasurementsforbenefitsexpectedtobeprovidedinthosefutureperiods?[Statement106.40] — — —


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(1)IftheplanisaffectedbytheMedicarePrescriptionDrugImprovementandModernizationAct:[FSPFAS106-2]

(a)Wheninitiallyrecognized,havetheeffectsontheAPBObeenaccountedforasanactuarialgain?[FSPFAS106-2.14] — — —

(b)Hasthesubsidybeenincludedinmeasuringthecostsofbenefitsattributabletocurrentservice?[FSPFAS106-2.15] — — —

(c)Iftherehasbeenachangeintheestimateofthesubsidy,hasthechangebeenreflectedasanactuarialexperiencegainorloss?[FSPFAS106-2.16] — — —

(d)Ifaplanisamended:

(1)TocauseaplanthatwasdeemednotactuariallyequivalentasoftheenactmentdateoftheActtonowprovideactuariallyequivalentbenefits,hasthedirecteffectoftheplanamendmentontheAPBO(thatis,theeffectofonlythechangeinprescriptiondrugcoverage)andtheeffectontheAPBOfromanyresultingsubsidytowhichtheemployerisexpectedtobeentitledasaresultoftheamendmentbeencombinedand:[FSPFAS106-2.17]

(a)IfthecombinedeffectreducesAPBO,wasitdeemedanactuarialexperiencegain?[FSPFAS106-2.17] — — —

(b)IfthecombinedeffectincreasesAPBO,wasitdeemedpriorservicecost?[FSPFAS106-2.17] — — —

(2)Tocauseaplanthatwasdeemedactuariallyequivalentasoftheenactmentdatetonownotbeconsideredactuariallyequivalent,hasthecombinedneteffectontheAPBOof(a)thesubsequentplanamendmentthatreducesbenefitsundertheplanandthusdisqualifiesthebenefitsasactuariallyequivalentand(b)theeliminationofthesubsidy,beenaccountedforaspriorservicecost(credit)asofthedatetheamendmentisadopted?[FSPFAS106–2.18] — — —

p.Futurechangesinlawsconcerningmedicalcostscoveredbygovernmentalprogramsandfuturechangesintheplansofotherprovidersarenotanticipated?[Statement106.40] — — —

q.Intheabsenceofhistoricalinformationaboutthegrosspercapitacostofcoveredbenefits,analternativemethodofdevelopingtheassumedpercapitaclaimscostisusedthatrepresentsthebestestimateoftheexpectedfuturecostofthebenefitscoveredbytheplan?[Statement106.41] — — —

r. Totheextentthatassumeddiscountrates,compensationlevels,andhealthcarecosttrendratesconsidersimilarinflationaryeffects,aretheassumptionsaboutthoseeffectsconsistent?[Statement106.42] — — —


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5.Forotherpostretirementplanbenefitobligationsandplanassets:

a.Haveplanassetsbeensegregatedandrestrictedanddotheyincludeamountscontributedbytheemployer(andplanparticipantsifacontributoryplan)andamountsearnedfrominvestingthecontributions,lessbenefits,incometaxes,andotherexpensesincurred?[Statement106.63] — — —

b.Havetheplanassetsandbenefitobligationsbeenmeasuredasofthedateoftheannualfinancialstatements,orifusedconsistentlyfromyeartoyear,asofadatenotmorethanthreemonthspriortothatdate?[Statement106.72] — — —

6.Doestheaccountingreflectthetermsoftheexchangetransactionthattakesplacebetweenanemployerthatprovidespostretirementbenefitsandtheemployeeswhorenderservicesinexchangeforthosebenefits?Isthesubstantiveplan,ifdifferentfromtheextantwrittenplan,thebasisfortheaccounting?[Statement106.23] — — —

a.Exceptasprovidedin(c)(1)and(c)(2)below,doestheemployer’scost-sharingpolicy,asevidencedbypastpracticeorcommunication,constitutethecost-sharingprovisionsofthesubstantiveplanifeitherofthefollowingconditionsexist:[Statement106.24]

(1)Theemployerhasapastpracticeof(a)maintainingaconsistentlevelofcostsharingbetweentheemployeranditsretireesthroughchangesindeductibles,coinsuranceprovisions,retireecontributions,orsomecombinationofthosechangesor(b)consistentlyincreasingorreducingtheemployer’sshareofthecostofthecoveredbenefitsthroughchangesinretiredoractiveplanparticipants’contributionstowardtheirretireehealthcarebenefits,deductibles,coinsuranceprovisions,out-or-pocketlimitations,andsoforth,inaccordancewiththeemployer’sestablishedcost-sharingpolicy?[Statement106.24] — — —

(2)Theemployerhastheability,andhascommunicatedtoaffectedplanparticipantsitsintent,toinstitutedifferentcost-sharingprovisionsataspecifiedtimeorwhencertainconditionsexist(forexample,whenhealthcarecostincreasesexceedacertainlevel)?[Statement106.24] — — —

b.Iftheconditionsin(a)(1)and(a)(2)donotexist,istheextantwrittenplanconsideredtobethesubstantiveplan?[Statement106.24] — — —

c.Dothefollowingnotconstituteprovisionsofthesubstantiveplan:[Statement106.25]

(1)Anemployer’spastpracticeofmaintainingaconsistentlevelofcostsharingwithitsretireesorconsistentlyincreasingorreducingitsshareofthecostofprovidingthecoveredbenefits,ifaccompaniedbyidentifiableoffsettingchangesinotherbenefitsorcompensationoriftheemployerincurredsignificantcosts,suchasworkstoppages,toeffectthatcost-sharingpolicy?[Statement106.25] — — —


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(2)Anemployer’scommunicationofitsintenttoinstitutecost-sharingprovisions,whichdiffersfromtheextantwrittenplanorthepastcost-sharingpractice,if(a)theplanparticipantswouldbeunwillingtoacceptthechangewithoutadverseconsequencestotheemployer’soperationsor(b)othermodificationsoftheplan,suchasthelevelofbenefitcoverage,orprovidingoffsettingchangesinotherbenefits,suchaspensionbenefits,wouldberequiredtogainplanparticipants’acceptanceofthechangetothecost-sharingarrangement?[Statement106.25] — — —

d.DotheservicecostcomponentofnetperiodicpostretirementbenefitcostandtheexpectedandAPBOreflectfutureincreasesinservicecostforwhichapresentsubstantivecommitmentexists?[Statement106.26] — — —

7.Ifbenefitsarecoveredbyannuityorotherinsurancecontracts,doestheaccountingconformtotheprovisionsofStatement106?[Statement106.67–.71] — — —


a.Havenetperiodicpostretirementbenefitcost,theAPBO,andplanassetsbeendeterminedforeachseparatelymeasuredplanoraggregationofplans?[Statement106.75and.76] — — —


a.Hastherequiredcontributionfortheperiodbeenrecognizedasnetpostretirementbenefitcost?[Statement106.81] — — —


c. Ifthewithdrawalfromamultiemployerplanundercircumstancesthatwouldgiverisetoanobligationisprobableorreasonablypossible,hasthecompanycompliedwiththeprovisionsofStatement5?[Statement106.83] — — —

d.Ifitisprobableorreasonablypossiblethatanemployer’scontributiontothefundwouldbeincreasedduringtheremainderofthecontractperiodtomakeupashortfallinthefundsnecessarytomaintainthenegotiatedlevelofbenefitcoverage(a“maintenanceofbenefits”clause)hastheemployerappliedtheprovisionsofStatement5?[Statement106.83] — — —


11.Havenon-U.S.plansbeenaccountedforinconformitywithStatement106?[Statement106.85]

— — —

12.Businesscombinations—Haveamountsassignedtoindividualassetsacquiredandliabilitiesassumed,exceptgoodwill,beendeterminedinaccordancewiththefollowinggeneralguide?(Amongothersourcesofrelevantinformation,independentappraisalsandactuarialorothervaluationsmaybeusedasanaidindeterminingtheestimatedfairvaluesofassetsacquiredandliabilitiesassumed.)


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a.Aliability(asset)fortheAPBOinexcessof(lessthan)thefairvalueofplanassetsofasingle-employerdefinedbenefitpostretirementplan? — — —

b.Also,ifitisexpectedthattheplanwillbeterminatedorcurtailed,havetheeffectsofthoseactionsbeenconsideredinmeasuringtheAPBO?[Statement141.37,106.86–.88] — — —

13.IntheinitialapplicationofStatement106foradefinedbenefitplan(s),wastheunrecognizedtransitionassetorobligationdeterminedinaccordancewithStatement106?[Statement106.108–.113] — — —

14.Ifthetransitionobligationwasnotimmediatelyrecognizedattransition,hastheunrecognizedtransitionnetassetorobligationbeenamortizedinaccordancewithStatement106indeterminingnetperiodicOPEBcost?[Statement106.46,.112and.113] — — —

15.Doesthegainorlosscomponentofnetperiodicpostretirementbenefitcostconsistof(a)thedifferencebetweentheactualreturnonplanassetsandtheexpectedreturnonplanassets,(b)anygainorlossimmediatelyrecognizedortheamortizationoftheunrecognizednetgainorlossfrompreviousperiods(ifanyisrequiredpursuanttoparagraph59ofStatement106),and(c)anyamountimmediatelyrecognizedasagainorlosspursuanttoparagraph61ofStatement106?[Statement106.58–.62] — — —

16.HastheunrecognizedpriorservicecostorcreditbeenamortizedinaccordancewithStatement106indeterminingnetperiodicpostretirementbenefitcost?[Statement106.46,.52–.55] — — —

17.Ifthecompanyhashadasettlement:[Statement106.90–.95,.100]

a.Hastheamountofthemaximumgainorlossincludedanyunrecognizednetgainorlossplusanyremainingunrecognizedtransitionasset?[Statement106.92] — — —

b.HasthemaximumgainorlossincludedthegainorlossresultingfromremeasurementofplanassetsandtheAPBOatthetimeofsettlement?[Statement106.92] — — —

c.IftheentireAPBOhasbeensettledandthemaximumamounttoberecognizedisagain,hasthegainbeenfirstreducedbyanyremainingunrecognizedtransitionobligationandanyexcessbeenrecognizedinincome?[Statement106.93] — — —

d.IftheentireAPBOhasbeensettledandthemaximumamounttoberecognizedisaloss,hasthelossbeenrecognizedinincome?[Statement106.93] — — —

e.IfonlypartoftheAPBOhasbeensettled,hastheexcessoftheamountequaltothepercentagereductionintheAPBOofthemaximumsettlementgainoveranyremainingunrecognizedtransitionobligationbeenrecognizedinincome?[Statement106.93] — — —


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f.Ifaparticipatinginsurancecontractpurchaseconstitutesthesettlement,hasthemaximumsettlementgainbeenreducedbythecostoftheparticipationright?[Statement106.94] — — —

g.Hastheaccountingpolicyadoptedforrecognitionofsettlementgainsandlosseswhenthecostsfortheyeararelessthanorequaltothesumoftheservicecostandinterestcostcomponentsofnetpostretirementbenefitcostfortheyearbeenconsistentlyapplied?[Statement106.95] — — —

h.Ifthegainorlossonthesettlementisdirectlyrelatedtodisposalofacomponentofanentity,istheamountincludedindeterminingthegainorlossassociatedwiththatevent?[Statement144.44(c)] — — —

18.Ifthecompanyhadacurtailment:[Statement106.96–.100]

a.Hastheunrecognizedpriorservicecostassociatedwithyearsofservicenolongerexpectedtoberenderedbeenrecognizedasaloss?[Statement106.97] — — —

(1)Hastheunrecognizedpriorservicecostincludedthecostofretroactiveamendmentsandanyremainingunrecognizednetobligation?[Statement106.97] — — —

b.HastheAPBObeenincreased(loss)ordecreased(gain)bytheeffectsofthecurtailment?[Statement106.98] — — —

(1)HasanyremainingunrecognizedtransitionassetthatexistedatinitialapplicationofStatement106beentreatedasanunrecognizednetgainandcombinedwiththeunrecognizednetgainorlossarisingafterthetransitionofStatement106?[Statement106.98] — — —

(2)Hastheincrease(loss)intheAPBObeenoffsetagainstanyunrecognizedgainasmeasuredin(b)(1)abovetotheextenttheAPBOincrease(loss)exceedsthegainmeasuredin(b)(1)above?[Statement106.98(b)] — — —

(3)Hasthedecrease(gain)intheAPBObeenoffsetagainstanyunrecognizedlossasmeasuredin(b)(1)abovetotheextenttheAPBOdecrease(gain)exceedsthelossmeasuredin(b)(1)above?[Statement106.98(a)] — — —

c.Hasthenetamountcalculatedin(b)(2)or(b)(3)beencombinedwiththepriorservicecostloss?[Statement106.97,.99] — — —

d.Ifthetotaloftheeffectsof(a),(b),and(c)aboveisanetloss,hasitbeenrecognizedwhenitisprobablethatacurtailmentwilloccurandtheneteffectisreasonablyestimable?[Statement106.99]

— — —



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19.Ifthecompanyprovidedbenefitstoemployeesinconnectionwiththeirterminationofemployment(specialterminationbenefitsorcontractualterminationbenefits):[Statement106.101and.102]

a.Ifspecialterminationbenefitswereoffered,hasaliabilityandalossbeenrecognizedwhentheemployeesacceptedtheofferandtheamountcouldbereasonablyestimated?[Statement106.101] — — —

(1)Wastheliabilityandthelossforthespecialterminationbenefitsrecognizedasthedifferencebetween(a)theAPBOforthoseemployees,assumingthatthoseemployees(activeplanparticipants)notyetfullyeligibleforbenefitswouldterminateattheirfulleligibilitydateandthatfullyeligibleplanparticipantswouldretireimmediately,withoutconsideringanyspecialterminationbenefitsand(b)theAPBOasmeasuredin(a)adjustedtoreflectthespecialterminationbenefits?[Statement106.102] — — —

b.Ifcontractualterminationbenefitswereprovided,wasaliabilityandalossrecognizedwhenitwasprobablethatemployeeswouldbeentitledtothebenefitsandtheamountcouldbereasonablyestimated?[Statement106.101] — — —

20.Ifthecompanyhasadefinedcontributionplan(s),



c.Ifthesubstanceofaplanistoprovideadefinedbenefit,doestheaccountingconformtotherequirementsfordefinedbenefitplans?[Statement106.107] — — —


06-5,“AccountingforPurchasesofLifeInsurance—DeterminingtheAmountThatCouldBeRealizedinAccordancewithFASBTechnicalBulletinNo.85-4,AccountingforPurchasesofLifeInsurance”—ThisIssueaddresseswhatamountsshouldbeincludedindeterminingtheamountthatcouldberealizedundertheinsurancecontract.

06-4,“AccountingforDeferredCompensationandPostretirementBenefitAspectsofEndorsementSplit-DollarLifeInsuranceArrangements”—ThisIssueaddresseswhetherthepostretirementbenefitassociatedwithanendorsementsplit-dollarlifeinsurancearrangementiseffectivelysettledinaccordancewitheitherFASBStatementNo.106,Employers’AccountingforPostretirementBenefitsOtherThanPensions,orAPBOpinionNo.12,DeferredCompensationContracts.


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05-5,“AccountingforEarlyRetirementorPostemploymentProgramswithSpecificFeatures(SuchAsTermsSpecifiedinAltersteilzeit[ATZ]EarlyRetirementArrangements)”—ThisIssueaddresses(1)howtoaccountforthebonusfeatureandadditionalcontributionsintotheGermangovernmentpensionschemeunderaTypeIIarrangementand(2)howtoaccountforthegovernmentsubsidyunderTypeIandTypeIIATZarrangements.



93-3,“PlanAssetsUnderFASBStatementNo.106”—ThisIssueaddresseswhetheratrustestablishedtopaypostretirementbenefitsmustbedeterminedtobebankruptcy-proofinorderfortheassetsinthetrusttoqualifyasplanassetsunderStatement106.

92-13,“AccountingforEstimatedPaymentsinConnectionWiththeCoalIndustryRetireeHealthBenefitActof1992”—ThisIssueaddresseshowenterprisesshouldaccountforthepaymentsthatarerequiredbytheCoalIndustryRetireeHealthBenefitActof1992.





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D-106,“ClarificationofQ&ANo.37ofFASBSpecialReport,AGuidetoImplementationofStatement87onEmployers’AccountingforPensions”—ThisIssuerevisedtheanswertoQ&A37,whichaddresseshowanemployershoulddeterminewhetheranadditionalminimumliabilityisrequiredifithasameasurementdateearlierthanitsfinancialreportdate.




Section II

1.Ifthecompanyhasdeferredcompensationcontractswithindividualemployeesthat,takentogether,areequivalenttoapostretirementincomeplan,hasStatement87beenapplied?[Statement106.13] — — —

2.Ifthecompanyhasdeferredcompensationcontractswithindividualemployeesthat,takentogether,areequivalenttoapostretirementhealthorwelfarebenefitplan,hasStatement106beenapplied?[Statement106.6,.9,.13] — — —


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3.Ifthecompanyhasotherdeferredcompensationcontracts,iscompensationbeingaccruedsystematicallyovertheperiodtothefulleligibilitydate(i.e.,thedateatwhichanemployeehasrenderedalltheservicenecessarytohaveearnedtherighttoreceiveallofthebenefitsexpectedtobereceivedbythatemployee)resultinginanamountequaltothethenpresentvalueofthefuturebenefitsexpectedtobepaid?[Statement106.13] — — —


a.Theservicecostcomponentofpostretirementbenefitcost,anypriorservicecost,andtheAPBOaremeasuredusingpresentvaluetechniquesandusingactuarialassumptionsthatindividuallyreflectthebestestimateofeachassumption,assumingtheplanwillcontinueineffectintheabsenceofevidencethatitwillnotcontinue?[Statement106.30] — — —

b.Assumeddiscountratesreflectthetimevalueofmoneyasofthemeasurementdateindeterminingthepresentvalueoffuturecashoutflowscurrentlyexpectedtoberequiredtosatisfythepostretirementbenefitobligation?[Statement106.31] — — —

c.Theexpectedlong-termrateofreturnonplanassetsreflectstheaveragerateofearningsexpectedontheexistingassetsthatqualifyasplanassetsandcontributionstotheplanexpectedtobemadeduringtheperiod,includingtheincometaxeffectsofsuchreturns,ifany?[Statement106.32] — — —

d.TheservicecostcomponentofnetperiodicpostretirementbenefitcostandtheexpectedandAPBOsreflectfuturecompensationlevelstotheextentthatthepostretirementbenefitformuladefinesthebenefitswhollyorpartiallyasafunctionoffuturecompensationlevels?[Statement106.33]

— — —

e.Forpay-relatedplans,assumedcompensationlevelsreflectthebestestimateoftheactualfuturecompensationlevelsoftheindividualemployeesinvolved,includingfuturechangesattributedtogeneralpricelevels,productivity,seniority,promotion,andotherfactors?[Statement106.33] — — —

f.Allassumptionsthatreflectexpectationsofthesamefutureeconomicconditions,suchasfutureratesofinflation,areconsistent?[Statement106.33] — — —

g.Doesmeasurementofanemployer’spostretirementhealthcareobligationincludetheuseofassumptionsaboutfactorsthatareuniquetohealthcarebenefitsandaffecttheamountandtimingoffuturebenefitpaymentsforpostretirementhealthcare,suchasconsiderationofhistoricalpercapitaclaimscostbyage,healthcarecosttrendrates(forplansthatprovideabenefitinkind),andmedicalcoveragetobepaidbygovernmentalauthoritiesandotherprovidersofhealthcarebenefits?[Statement106.34] — — —


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h.Istheemployer’sshareoftheexpectedfuturepostretirementhealthcarecost(aggregateassumednetincurredclaimscost)foraplanparticipantdevelopedbyreducingtheassumedpercapitaclaimscostbyeachofthefollowing:[Statement106.35] — — —

(1)Ateachageatwhichtheplanparticipantisexpectedtoreceivebenefitsundertheplanby(a)theeffectsofcoveragebyMedicare,includingtheeffectsoftheMedicarePrescriptionDrug,ImprovementandModernizationAct(Act),andotherprovidersofhealthcarebenefits,and(b)theeffectsofthecost-sharingprovisionsoftheplan(deductibles,copaymentprovisions,out-of-pocketlimitations,capsonthelimitsoftheemployer-providedpayments,andretireecontributions)? — — —

(2)Theactuarialpresentvalueoftheplanparticipants’futurecontributionsifcontributionsarerequiredtobepaidbyactiveplanparticipantstowardtheirpostretirementhealthcarebenefits? — — —

i.Theassumedpercapitaclaimscostbyagerepresentsthebestestimateoftheexpectedfuturecostofthebenefitscoveredbytheplan?[Statement106.36] — — —

j.Pastandpresentclaimsdatafortheplanareusedindevelopingthecurrentpercapitaclaimscosttotheextentthatthosedataareconsideredtobeindicativeofthecurrentcostofprovidingthebenefitscoveredbytheplan?[Statement106.37] — — —

k.Thecurrentclaimsdataareadjustedbytheassumedhealthcarecosttrendrate?[Statement106.37]

— — —

l.Intheabsenceofsufficientlyreliableplandataaboutthecurrentcostofthebenefitscoveredbytheplan,currentpercapitaclaimscostisbased,entirelyorinpart,ontheclaimsinformationofotheremployersadjustedtobestreflectthetermsoftheemployer’splanandtheplandemographics,totheextentthosecostsareindicativeofthecurrentcostofprovidingthebenefitscoveredbytheplan?[Statement106.38] — — —

m.Currentpercapitaclaimscostderivedfrominformationfromoutsidesources(e.g.,insurancecompanies,actuarialfirms,consultingfirms)hasbeenadjustedtobestreflectthetermsoftheemployer’splanandtheplandemographics?[Statement106.38] — — —

n.Bothpastandcurrenthealthcarecosttrendsareusedindevelopinganemployer’sassumedhealthcarecosttrendrates?[Statement106.39] — — —

o.Presentlyenactedchangesinthelaworamendmentsoftheplansofotherhealthcareprovidersthattakeeffectinfutureperiodsandthatwillaffectthefutureleveloftheirbenefitcoveragesareconsideredincurrent-periodmeasurementsforbenefitsexpectedtobeprovidedinthosefutureperiods?[Statement106.40] — — —


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(1)IftheplanisaffectedbytheMedicarePrescriptionDrugImprovementandModernizationAct:[FSPFAS106-2]

(a)Wheninitiallyrecognized,havetheeffectsontheAPBObeenaccountedforasanactuarialgain?[FSPFAS106-2.14] — — —

(b)Hasthesubsidybeenincludedinmeasuringthecostsofbenefitsattributabletocurrentservice?[FSPFAS106-2.15] — — —

(c)Iftherehasbeenachangeintheestimateofthesubsidy,hasthechangebeenreflectedasanactuarialexperiencegainorloss?[FSPFAS106-2.16] — — —

(d)Ifaplanisamended:

(1)TocauseaplanthatwasdeemednotactuariallyequivalentasoftheenactmentdateoftheActtonowprovideactuariallyequivalentbenefits,hasthedirecteffectoftheplanamendmentontheAPBO(thatis,theeffectofonlythechangeinprescriptiondrugcoverage)andtheeffectontheAPBOfromanyresultingsubsidytowhichtheemployerisexpectedtobeentitledasaresultoftheamendmentbeencombinedand:[FSPFAS106-2.17]

a.IfthecombinedeffectreducesAPBO,wasitdeemedanactuarialexperiencegain?[FSPFAS106-2.17] — — —

b.IfthecombinedeffectincreasesAPBO,wasitdeemedpriorservicecost?[FSPFAS106-2.17]

— — —

(2)Tocauseaplanthatwasdeemedactuariallyequivalentasoftheenactmentdatetonownotbeconsideredactuariallyequivalent,hasthecombinedneteffectontheAPBOof(a)thesubsequentplanamendmentthatreducesbenefitsundertheplanandthusdisqualifiesthebenefitsasactuariallyequivalentand(b)theeliminationofthesubsidy,beenaccountedforaspriorservicecost(credit)asofthedatetheamendmentisadopted?[FSPFAS106-2.18] — — —

p.Futurechangesinlawsconcerningmedicalcostscoveredbygovernmentalprogramsandfuturechangesintheplansofotherprovidersarenotanticipated?[Statement106.40] — — —

q.Intheabsenceofhistoricalinformationaboutthegrosspercapitacostofcoveredbenefits,analternativemethodofdevelopingtheassumedpercapitaclaimscostisusedthatrepresentsthebestestimateoftheexpectedfuturecostofthebenefitscoveredbytheplan?[Statement106.41] — — —

r. Totheextentthatassumeddiscountrates,compensationlevels,andhealthcarecosttrendratesconsidersimilarinflationaryeffects,aretheassumptionsaboutthoseeffectsconsistent?[Statement106.42] — — —


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5.Forotherpostretirementplanbenefitobligationsandplanassets:

a.Haveplanassetsbeensegregatedandrestrictedanddotheyincludeamountscontributedbytheemployer(andplanparticipantsifacontributoryplan)andamountsearnedfrominvestingthecontributions,lessbenefits,incometaxes,andotherexpensesincurred?[Statement106.63] — — —

b.Havetheplanassetsandbenefitobligationsbeenmeasuredasofthedateoftheannualfinancialstatementsexceptinspecificsituationsoutlinedinparagraph72ofStatement106?[NotethatiftheentityhasonlyadoptedtherecognitionandrelateddisclosureprovisionsofStatement158,buthasnotyetadopteditsmeasurementdateprovisions(whichareeffectiveforfiscalyearsendingafterDecember15,2008,forallentities)theentitymayuseameasurementdateasofadatenotmorethanthreemonthspriortoitsfiscalyearend,ifitisusedconsistentlyfromyeartoyear,untiltheadoptionofStatement158’smeasurementdateprovisions.][Statement158.D2(n),Statement106.72] — — —

6.Doestheaccountingreflectthetermsoftheexchangetransactionthattakesplacebetweenanemployerthatprovidespostretirementbenefitsandtheemployeeswhorenderservicesinexchangeforthosebenefits?Isthesubstantiveplan,ifdifferentfromtheextantwrittenplan,thebasisfortheaccounting?[Statement106.23] — — —

a. Exceptasprovidedin(c)(1)and(c)(2)below,doestheemployer’scost-sharingpolicy,asevidencedbypastpracticeorcommunication,constitutethecost-sharingprovisionsofthesubstantiveplanifeitherofthefollowingconditionsexist:

(1)Theemployerhasapastpracticeof(a)maintainingaconsistentlevelofcostsharingbetweentheemployeranditsretireesthroughchangesindeductibles,coinsuranceprovisions,retireecontributions,orsomecombinationofthosechangesor(b)consistentlyincreasingorreducingtheemployer’sshareofthecostofthecoveredbenefitsthroughchangesinretiredoractiveplanparticipants’contributionstowardtheirretireehealthcarebenefits,deductibles,coinsuranceprovisions,out-or-pocketlimitations,andsoforth,inaccordancewiththeemployer’sestablishedcost-sharingpolicy?[Statement106.24] — — —

(2)Theemployerhastheability,andhascommunicatedtoaffectedplanparticipantsitsintent,toinstitutedifferentcost-sharingprovisionsataspecifiedtimeorwhencertainconditionsexist(forexample,whenhealthcarecostincreasesexceedacertainlevel)?[Statement106.24] — — —

b.Iftheconditionsin(a)(1)and(a)(2)donotexist,istheextantwrittenplanconsideredtobethesubstantiveplan?[Statement106.24] — — —

c.Dothefollowingnotconstituteprovisionsofthesubstantiveplan:[Statement106.25]


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(1)Anemployer’spastpracticeofmaintainingaconsistentlevelofcostsharingwithitsretireesorconsistentlyincreasingorreducingitsshareofthecostofprovidingthecoveredbenefits,ifaccompaniedbyidentifiableoffsettingchangesinotherbenefitsorcompensationoriftheemployerincurredsignificantcosts,suchasworkstoppages,toeffectthatcost-sharingpolicy?[Statement106.25] — — —

(2)Anemployer’scommunicationofitsintenttoinstitutecost-sharingprovisions,thatdifferfromtheextantwrittenplanorthepastcost-sharingpractice,if(a)theplanparticipantswouldbeunwillingtoacceptthechangewithoutadverseconsequencestotheemployer’soperationsor(b)othermodificationsoftheplan,suchasthelevelofbenefitcoverage,orprovidingoffsettingchangesinotherbenefits,suchaspensionbenefits,wouldberequiredtogainplanparticipants’acceptanceofthechangetothecost-sharingarrangement?[Statement106.25] — — —

d.DotheservicecostcomponentofnetperiodicpostretirementbenefitcostandtheexpectedandAPBOreflectfutureincreasesinservicecostforwhichapresentsubstantivecommitmentexists?[Statement106.26] — — —

7.Ifbenefitsarecoveredbyannuityorotherinsurancecontracts,doestheaccountingconformtotheprovisionsofStatement106?[Statement106.67–.71] — — —


a.Havenetperiodicpostretirementbenefitcost,theAPBO,andplanassetsbeendeterminedforeachseparatelymeasuredplanoraggregationofplans?[Statement106.75and.76] — — —




c.Ifthewithdrawalfromamultiemployerplanundercircumstancesthatwouldgiverisetoanobligationisprobableorreasonablypossible,hasthecompanycompliedwiththeprovisionsofStatement5?[Statement106.83] — — —

d.Ifitisprobableorreasonablypossiblethatanemployer’scontributiontothefundwouldbeincreasedduringtheremainderofthecontractperiodtomakeupashortfallinthefundsnecessarytomaintainthenegotiatedlevelofbenefitcoverage(a“maintenanceofbenefits”clause)hastheemployerappliedtheprovisionsofStatement5?[Statement106.83] — — —


Appendix GPostretirementBenefits

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11.Havenon-U.S.plansbeenaccountedforinconformitywithStatement106?[Statement106.85] — — —

12.Businesscombinations—Haveamountsassignedtoindividualassetsacquiredandliabilitiesassumed,exceptgoodwill,beendeterminedinaccordancewiththefollowinggeneralguide?(Amongothersourcesofrelevantinformation,independentappraisalsandactuarialorothervaluationsmaybeusedasanaidindeterminingtheestimatedfairvaluesofassetsacquiredandliabilitiesassumed.) — — —

a.Aliability(asset)fortheAPBOinexcessof(lessthan)thefairvalueofplanassetsofasingle-employerdefinedbenefitpostretirementplan? — — —

b.Also,ifitisexpectedthattheplanwillbeterminatedorcurtailed,havetheeffectsofthoseactionsbeenconsideredinmeasuringtheAPBO?[Statement141.37,106.86–.88] — — —

13.IntheinitialapplicationofStatement106foradefinedbenefitplan(s),wasthetransitionassetorobligationdeterminedinaccordancewithStatement106?[Statement106.108–.113]

— — —

14.Ifthetransitionobligationwasnotimmediatelyrecognizedattransition,hasthetransitionnetassetorobligationincludedinAOCIbeenamortizedinaccordancewithStatement106indeterminingnetperiodicOPEBcost?[Statement158.D2(e),Statement106.46,.112and.113] — — —

15.Doesthegainorlosscomponentofnetperiodicpostretirementbenefitcostconsistof(a)thedifferencebetweentheactualreturnonplanassetsandtheexpectedreturnonplanassets,(b)anygainorlossimmediatelyrecognizedortheamortizationofthenetgainorlossincludedinAOCI(ifanyisrequiredpursuanttoparagraph59ofStatement106),and(c)anyamountimmediatelyrecognizedasagainorlosspursuanttoparagraph61ofStatement106?[Statement158.D2(j)–(l),Statement106.58–.62] — — —

16.HasthepriorservicecostorcreditbeenamortizedinaccordancewithStatement106indeterminingnetperiodicpostretirementbenefitcost?[Statement158.D2(e)–(h),Statement106.46,.52–.55] — — —

17.Regardingtherecognitionofotherpostretirementbenefitassetsandliabilities:

a.HasaliabilitybeenrecognizedthatequalstheunfundedAPBOiftheAPBOexceedsthefairvalueofplanassets?[Statement158.D2(d),Statement106.44A] — — —

b.HasanassetbeenrecognizedthatequalstheoverfundedAPBOifthefairvalueofplanassetsexceedstheAPBO?[Statement158.D2(d),Statement106.44A] — — —

18.Ifthecompanyhashadasettlement:[Statement158.D2(q)and(r),Statement106.90–.95,.100]


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a.HastheamountofthemaximumgainorlossincludedanynetgainorlossincludedinAOCIplusanytransitionassetremaininginAOCI?[Statement158.D2(q),Statement106.92] — — —

b.HasthemaximumgainorlossincludedthegainorlossresultingfromremeasurementofplanassetsandtheAPBOatthetimeofsettlement?[Statement158.D2(q),Statement106.92] — — —

c.IftheentireAPBOhasbeensettledandthemaximumamounttoberecognizedisagain,hasthegainbeenfirstreducedbyanytransitionobligationremaininginAOCIandanyexcessbeenrecognizedinincome?[Statement158.D2(r),Statement106.93] — — —

d.IftheentireAPBOhasbeensettledandthemaximumamounttoberecognizedisaloss,hasthelossbeenrecognizedinincome?[Statement106.93] — — —

e.IfonlypartoftheAPBOhasbeensettled,hastheexcessoftheamountequaltothepercentagereductionintheAPBOofthemaximumsettlementgainoveranyremainingtransitionobligationbeenrecognizedinincome?[Statement106.93]

— — —

f.Ifaparticipatinginsurancecontractpurchaseconstitutesthesettlement,hasthemaximumsettlementgainbeenreducedbythecostoftheparticipationright?[Statement106.94] — — —

g.Hastheaccountingpolicyadoptedforrecognitionofsettlementgainsandlosseswhenthecostsfortheyeararelessthanorequaltothesumoftheservicecostandinterestcostcomponentsofnetpostretirementbenefitcostfortheyearbeenconsistentlyapplied?[Statement106.95] — — —

h.Ifthegainorlossonthesettlementisdirectlyrelatedtodisposalofacomponentofanentity,istheamountincludedindeterminingthegainorlossassociatedwiththatevent?[Statement144.44(c)] — — —

19.Ifthecompanyhadacurtailment:[Statement106.96–.100]

a.HasthepriorservicecostincludedinAOCIassociatedwithyearsofservicenolongerexpectedtoberenderedasaresultofthecurtailmentbeentreatedasaloss?[Statement158.D2(s),Statement106.97] — — —

(1)Hasthepriorservicecost,remaininginAOCI,includedthecostofretroactiveamendmentsandanyremainingtransitionobligation?[Statement158.D2(s),Statement106.97] — — —

b.HastheAPBObeenincreased(loss)ordecreased(gain)bytheeffectsofthecurtailment?[Statement106.98] — — —

(1)HasanyremainingtransitionassetincludedinAOCIbeentreatedasanetgainandcombinedwiththenetgainorlossremaininginAOCIarisingafterthetransitionofStatement106?[Statement158.D2(t),Statement106.98] — — —


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(2)Hastheincrease(loss)intheAPBObeenoffsetagainstanygainasmeasuredin(b)(1)abovetotheextenttheAPBOincrease(loss)exceedsthegainmeasuredin(b)(1)above?[Statement106.98(b)] — — —

(3)Hasthedecrease(gain)intheAPBObeenoffsetagainstanylossasmeasuredin(b)(1)abovetotheextenttheAPBOdecrease(gain)exceedsthelossmeasuredin(b)(1)above?[Statement106.98(a)] — — —

c.Hasthenetamountcalculatedin(b)(2)or(b)(3)beencombinedwiththepriorservicecostloss?[Statement106.97,.99] — — —

d.Ifthetotaloftheeffectsof(a),(b),and(c)aboveisanetloss,hasitbeenrecognizedwhenitisprobablethatacurtailmentwilloccurandtheneteffectisreasonablyestimable?[Statement106.99] — — —



20.Ifthecompanyprovidedbenefitstoemployeesinconnectionwiththeirterminationofemployment(specialterminationbenefitsorcontractualterminationbenefits):[Statement106.101and.102]

a.Ifspecialterminationbenefitswereoffered,hasaliabilityandalossbeenrecognizedwhentheemployeesacceptedtheofferandtheamountcouldbereasonablyestimated?[Statement106.101] — — —

(1)Wastheliabilityandthelossforthespecialterminationbenefitsrecognizedasthedifferencebetween(a)theAPBOforthoseemployees,assumingthatthoseemployees(activeplanparticipants)notyetfullyeligibleforbenefitswouldterminateattheirfulleligibilitydateandthatfullyeligibleplanparticipantswouldretireimmediately,withoutconsideringanyspecialterminationbenefitsand(b)theAPBOasmeasuredin(a)adjustedtoreflectthespecialterminationbenefits?[Statement106.102] — — —

b.Ifcontractualterminationbenefitswereprovided,wasaliabilityandalossrecognizedwhenitwasprobablethatemployeeswouldbeentitledtothebenefitsandtheamountcouldbereasonablyestimated?[Statement106.101] — — —




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c.Ifthesubstanceofaplanistoprovideadefinedbenefit,doestheaccountingconformtotherequirementsfordefinedbenefitplans?[Statement106.107] — — —


06-5,“AccountingforPurchasesofLifeInsurance—DeterminingtheAmountThatCouldBeRealizedinAccordancewithFASBTechnicalBulletinNo.85-4,AccountingforPurchasesofLifeInsurance”—ThisIssueaddresseswhatamountsshouldbeincludedindeterminingtheamountthatcouldberealizedundertheinsurancecontract.

06-4,“AccountingforDeferredCompensationandPostretirementBenefitAspectsofEndorsementSplit-DollarLifeInsuranceArrangements”—ThisIssueaddresseswhetherthepostretirementbenefitassociatedwithanendorsementsplit-dollarlifeinsurancearrangementiseffectivelysettledinaccordancewitheitherFASBStatementNo.106,Employers’AccountingforPostretirementBenefitsOtherThanPensions,orAPBOpinionNo.12,DeferredCompensationContracts.

05-5,“AccountingforEarlyRetirementorPostemploymentProgramswithSpecificFeatures(SuchAsTermsSpecifiedinAltersteilzeit[ATZ]EarlyRetirementArrangements)”—ThisIssueaddresses(1)howtoaccountforthebonusfeatureandadditionalcontributionsintotheGermangovernmentpensionschemeunderaTypeIIarrangementand(2)howtoaccountforthegovernmentsubsidyunderTypeIandTypeIIATZarrangements.




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93-3,“PlanAssetsUnderFASBStatementNo.106”—ThisIssueaddresseswhetheratrustestablishedtopaypostretirementbenefitsmustbedeterminedtobebankruptcy-proofinorderfortheassetsinthetrusttoqualifyasplanassetsunderStatement106.

92-13,“AccountingforEstimatedPaymentsinConnectionwiththeCoalIndustryRetireeHealthBenefitActof1992”—ThisIssueaddresseshowenterprisesshouldaccountforthepaymentsthatarerequiredbytheCoalIndustryRetireeHealthBenefitActof1992.

92-12,“AccountingforOPEBCostsbyRate-RegulatedEnterprises”—ThisIssueaddresseswhatcriteriaorevidenceisneededforarate-regulatedenterprisetosatisfytherequirementsofFASBStatementNo.71,AccountingfortheEffectsofCertainTypesofRegulation,torecognizearegulatoryassetforStatement106,costs.







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Appendix H — Comparison of U.S. GAAP and IFRSsU.S.GAAPandinternationalfinancialreportingstandards(IFRSs)havesimilarapproachestoemployers’accountingforpensionsandotherpostretirementbenefits.Forexample,bothapproachesprovideforanetpresentationofplanassetsandliabilities,andfordeferredrecognitioninincomeofactuarialgainsandlosses.However,therearesomesignificantdifferences.

TheIFRSsonemployers’accountingforpensionandotherpostretirementbenefitscanbefoundinIAS19,EmployeeBenefits.SinceSeptember2002,theFASBandIASBhavebeenworkingtodevelophigh-quality,compatibleaccountingstandardsforuseinbothdomesticandcross-borderfinancialreporting.Recently,theseorganizationshavebeencoordinatingcertainoftheircurrentprojectsinworkingtowardconvergence.In2004,IAS19wasrevisedtoincorporatetheoptiontorecordactuarialgainsandlosses(intheperiodinwhichtheyoccur)inthestatementofrecognizedincomeandexpense(analogoustoastatementofOCI).InSeptember2006,theFASBissuedStatement158,whichmorecloselyresembledIAS19,byrequiringcompaniestomeasuretheirplanassetsandbenefitobligationsasoftheemployer’syear-end.

InJuly2006,theIASBaddedaprojecttoitsagendatoreviewallaspectsofpostemploymentbenefitaccounting(includingpensionsandotherpostretirementbenefits).TheIASB’sprojectwillbeconductedintwophases:phase1willfocusonimprovingtheexistingstandard,andphase2willcenteronachievingconvergencebetweenU.S.GAAPandIFRSs.

TheaccompanyingtableisaU.S.GAAPandIFRScomparison,highlightingcertaindifferencesrelatedtoemployers’accountingforpostretirementbenefits.

Topic U.S. GAAP Pre-158 U.S. GAAP Post-158 IFRS

Pension or Other Postretirement Benefit Assets

Nolimitationontheamountthatcanberecognized.

Prepaidasset—representstheexcessofcumulativecontributionstothedefinedbenefitplanoverrecognizedexpense.

Theprepaidassetispresumedtoberecoveredthroughfutureactuariallosses,andthereforeanimpairmentassessmentisnotrequiredunderU.S.GAAP.

Nolimitationontheamountthatcanberecognized.

Fullyrecognizeanassetfortheoverfundedstatusofthebenefitplansinthefinancialstatements.

Theassetrecognizedismeasuredastheexcessofthefairvalueoftheplan’sassetsoverthebenefitobligation.

Limitstheextenttowhichanetdefinedbenefitplanasset(prepaidpensionasset)isrecognizedtothelesserof:(a)theexcessofplanassetsoverthePBO1plusanycumulativeunrecognizednetactuarialgainsorlossesandpriorservicecost(b)thetotalofanycumulativeunrecognizednetactuariallossesandpriorservicecostandthepresentvalueofanyeconomicbenefitsavailableintheformofrefundsfromtheplanorreductionsinfuturecontributionstotheplan,determinedusingthediscountrateusedinmeasuringthePBO.

1 IAS 19 (revised 2004) requires the use of the projected unit credit method in computing the benefit obligation. This method uses similar actuarial assumption to those used to determine the PBO under U.S. GAAP.

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Presentation of Prior Service Costs in the Balance Sheet

NotrecognizedasanadditionalintangibleifanAMLisrequired.

ReclassifytoAOCIanyintangiblesuponadoptionofStatement158.RecordanysubsequentamountsinOCI.

PresentedasanoffsetorincreasetoPBO.

Minimum Liability Recognition for Benefits Under Defined Benefit Plans

Pensions—requires,ataminimum,anaccruedbenefitobligationfortheunfundedportionoftheABO(minimumliability).

Otherpostretirementbenefits—thereisnominimumliabilityrequirement.

Fullyrecognizealiabilityfortheunderfundedstatusofthedefinedbenefitplansinthefinancialstatements.

Theliabilityrecognizedismeasuredastheexcessoftheplan’sbenefitobligation2 overthefairvalueoftheplan’sassets.

Nominimumliabilityrequirement.IFRSfocusesonhowtheliabilityismeasured.ThisisbasedonthePBO(whichisconsistentwithStatement158)ratherthanonthefundedstatusoftheplanatthebalancesheetdate(asprovidedbyU.S.GAAPpriortotheadoptionofStatement158).

Income Statement Recognition of Prior Service Cost Related to Benefits That Have Vested

Generallyamortizedovertheremainingserviceperiodorlifeexpectancy.

NotaffectedbyStatement158.

Recognizeimmediately.

Actuarial Gains and Losses (Income Statement Treatment)

Statements87and106requirethatincasesinwhichall,oralmostall,ofaplan’sparticipantsareinactive,suchamountshouldbeamortizedintoincomeovertheaverageremaininglifeexpectancyoftheinactiveparticipantsinsteadoftheaverageremainingserviceperiod.


Ifanentityelectstoapplythedeferralmethod,actuarialgainsandlossesareamortizedoveraperiodnolongerthantheexpectedaverageremainingworkinglivesoftheemployeesparticipatingintheplan.

Recognizing Actuarial Gains and Losses, When They Arise, Directly in the Statement of Equity

Notpermitted. GainsandlossesarerecordedinOCIwhentheyarise.Gainsandlosseswillberecycledtotheincomestatementinfutureperiods.

Permitted;however,gainsandlossesarerecordedtoretainedearnings.

Iftheentityrecognizesgainsandlossesimmediatelyinequity,theamountswillnotbe“recycled”totheincomestatementinfutureperiods.

2 Benefit obligation is measured as projected benefit obligation (PBO) for pension plans and the accumulated postretirement benefit obligation (APBO) for other postretirement benefit plans.

Appendix H PostretirementBenefits

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Termination Benefits

Recognizespecialterminationbenefitswhenemployeesaccepttheofferandtheamountcanbereasonablyestimated.

Recognizecontractualterminationbenefitswhenitisprobablethatemployeeswillbeentitledtoreceivethebenefitandtheamountcanbereasonablyestimated.


Nodistinctionbetween“special”andotherterminationbenefits.

Terminationbenefitsarerecognizedwhentheemployerisdemonstrablycommittedtopay.

Measurement of Gain or Loss to Be Recognized in Income on Curtailment of a Benefit Plan

Curtailmentgainorlosstoberecognizedconsistsoftwopieces:(1)aportionofunrecognizedpriorservicecost(priorservicegain),whichforthispurposeincludesanyremainingunrecognizedtransitionobligationand(2)thechangeinthePBO—againoralossreducedbyanynetunrecognizedlossorgain,whichforthispurposeincludesanyremainingunrecognizedtransitionasset.Theportionofpriorservicecost(priorservicegain)toberecognizedismeasuredonthebasisoftheyearsofservicethatwillnolongerberendered.

NotaffectedbyStatement158;however,allunrecognizedamountsusedincalculatingthegainorlosswillberecordedinAOCIuponadoptionofStatement158.

Curtailmentgainorlosstoberecognizedconsistsofthreepieces:(1)anychangeinthepresentvalueofthedefinedbenefitobligationresultingfromthecurtailment;(2)anyresultingchangeinthefairvalueoftheplanassets;and(3)aportionofanyrelatedunrecognizedactuarialgainsandlosses(notpreviouslyrecognizedinequity)andpriorservicecost(includinganyunrecognizedtransitionalamounts).Theportionofunrecognizedactuarialgainsandlossesandpriorservicecosttoberecognizedismeasuredonthebasisofthepresentvalueoftheobligationsbeforeandafterthecurtailment,unlessanotherbasisismorerational.Thatis,iftheobligationisreducedby10percent,theamountofnetunrecognizedgain(loss)andunrecognizedpriorservicecosttoberecognizedwouldbe10percent.

Timing Recognition of Gains/Losses on Curtailment of a Benefit Plan (Income Statement Treatment)

Acurtailmentlossisrecognizedwhenitisprobablethatacurtailmentwilloccurandtheeffectsarereasonablyestimable.

Acurtailmentgainisrecognizedwhentherelevantemployeesareterminatedortheplansuspensionoramendmentisadopted,whichcouldoccuraftertheentityisdemonstrablycommittedandacurtailmentisannounced.


Bothcurtailmentgainsandlossesarerecognizedwhenacurtailmentoccurs.

Appendix H PostretirementBenefits

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Appendix I — Resources

Deloitte & Touche USA LLP Publications

Thefollowingpublicationsareavailableonwww.deloitte.comandmaybeconsultedforadditionalinformation:

•HeadsUp—Employers’AccountingforDefinedBenefitPensionandOtherPostretirementPlans(Deloitte&ToucheLLP)

•SecuringRetirement:AnOverviewofthePensionProtectionActof2006(DeloitteTaxLLP)

•SecuringtheFuture:DefinedBenefitPlansandthePensionProtectionActof2006(DeloitteConsultingLLP)

•2006SurveyofEconomicAssumptionsUsedforSFASNo.87andSFASNo.106Purposes(DeloitteConsultingLLP)

Accounting Standard Setters and Regulators

Websitesoftheaccountingstandardsettersandregulatorsdiscussedinthispublicationincludethefollowing:

•FinancialAccountingStandardsBoard(www.fasb.org).

•InternationalAccountingStandardsBoard(www.iasb.org).

•InternalRevenueService(www.irs.gov).

•PensionBenefitGuarantyCorporation(www.pbgc.gov).

•U.S.SecuritiesandExchangeCommission(www.sec.gov).

•U.S.DepartmentofLabor(www.dol.gov).

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Appendix J — Abbreviations

ABO Accumulatedbenefitobligation

AICPA AmericanInstituteofCertifiedPublicAccountants

AML Additionalminimumliability

AOCI Accumulatedothercomprehensiveincome

APBO Accumulatedpostretirementbenefitobligation

ASOP ActuarialStandardofPractice

DOL DepartmentofLabor

EBSA EmployeeBenefitsSecurityAdministration

EGTRRA EconomicGrowthandTaxReliefReconciliationActof2001

EITF EmergingIssuesTaskForce

EPCRS EmployeePlansComplianceResolutionSystem

ERISA EmployeeRetirementIncomeSecurityAct

ESOP Employeestockownershipplan

FASB FinancialAccountingStandardsBoard

FSP FASBStaffPosition

GAAP Generallyacceptedaccountingprinciples

IRC InternalRevenueCode

IRS InternalRevenueService

MD&A Management’sDiscussionandAnalysis

OCI Othercomprehensiveincome

PBGC PensionBenefitGuarantyCorporation

PBO Projectedbenefitobligation

PCAOB PublicCompanyAccountingOversightBoard

PPA PensionProtectionActof2006

SEC SecuritiesandExchangeCommission

SOP AICPAStatementofPosition

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 140 countries. With access to the deep intellectual capital of approximately 135,000 people worldwide, Deloitte delivers services in four professional areas, audit, tax, consulting and financial advisory services, and serves more than 80 percent of the world’s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas.

As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte”, “Deloitte & Touche”, “Deloitte Touche Tohmatsu” or other related names.

In the United States, Deloitte & Touche USA LLP is the U.S. member firm of Deloitte Touche Tohmatsu and services are provided by the subsidiaries of Deloitte & Touche USA LLP (Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Financial Advisory Services LLP, Deloitte Tax LLP, and their subsidiaries), and not by Deloitte & Touche USA LLP. The subsidiaries of the U.S. member firm are among the nation’s leading professional services firms, providing audit, tax, consulting, and financial advisory services through nearly 40,000 people in more than 90 cities. Known as employers of choice for innovative human resources programs, they are dedicated to helping their clients and their people excel. For more information, please visit the U.S. member firm’s Web site at www.deloitte.com.

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