More NewsGASB Proposes Improvements for Pension Reporting

GASB Proposes Improvements for Pension Reporting

The Governmental Accounting Standards Board (GASB) has issued two Exposure Drafts proposing improvements to financial reporting of pensions by state and local governments: Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans. The documents would propose amendments to the existing pension standards to improve how the costs and obligations associated with the pensions that governments provide to their employees are calculated and reported.

The Accounting and Financial Reporting for Pensions (Pension Exposure Draft) primarily relates to reporting by governments that provide pensions to their employees. The Financial Reporting for Pension Plans (Pension Plan Exposure Draft) addresses the reporting by the pension plans that administer those benefits.

“Users of state and local government financial reports have told the GASB that current standards do not provide enough information to adequately understand the cost and the liability for benefits promised to active and retired employees,” said GASB chairman Robert Attmore. “The proposals contained in these Exposure Drafts are the result of years of research and extensive deliberations by the board to address these issues and make financial reporting of pensions more transparent, comparable and useful to citizens, legislators, and bond analysts.”

The Pensions Exposure Draft proposes that governments be required to report in their statement of financial position a net pension liability which is the difference between the total pension liability and net assets (primarily investments reported at fair value) set aside in a qualified trust to pay benefits to current employees, retirees, and their beneficiaries. It also proposes significant changes to how a government would calculate its total pension liability and pension expense.

This draft addresses situations in which another entity contributes to a government’s pension plan on behalf of the employer and it also addresses accounting and financial reporting for employers that provide pensions through defined contribution plans.

The Pension Plan Exposure Draft, which addresses financial reporting for plans that are administered through qualified trusts, outlines the basic framework for the separately issued financial reports of defined benefit pension plans. It also details proposed note disclosure requirements for defined contribution pension plans.

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