Financial Board Issues New Rules for Accounting Firms
Called ""Statement 87, Employers Accounting For Pensions,'' it requires companies to use a standarized method for measuring net periodic pension cost over the employee's service life, to disclose more information about the status of their plans in the notes to financial statements and to recognize a liability when the accumulated benefit obligation exceeds the fair value of plan assets.
Statement 87 and a statement on settlements and curtailments of pension plans, which will be issued in the coming week, represent the final stages of the pension projects that the board has dealt with since 1974. FASB Chairman Donald J. Kirk said the board voted 4-3 to accept Statement 87.
Kirk said in Statement 87, the board changed the method used to calculate the return on pension plan assets, one component of net pension cost.
""Many commentators believed that the proposed method would cause net pension cost to be excessively volatile,'' he said. ""The method permitted by Statement 87 will allow employees to reduce the volatility by calculating return on assets using an averaging technique that would lessen the the effects of changes in asset value. …