Financial Reporting


  A new Financial Accounting Standards Board rule requires employers to fully recognize pension and other postretirement plan obligations on their financial statements. FASB Statement no. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, requires employers that are business entities to recognize on their balance sheets an asset for a plan’s overfunded status or a liability for a plan’s underfunded status, measure their plans’ assets and obligations at the end of each fiscal year and recognize changes in the funded status of defined benefit retirement plans in the year the changes occur. Public companies must recognize the funded status of benefit plans for fiscal years ending after December 15, 2006; for private companies and nonprofits, the deadline is for fiscal years ending after June 15, 2007. The requirement to measure plan assets and obligations on the date of the employer’s yearend balance sheet is effective for fiscal years ending after December 15, 2008. For more information, visit www.fasb.org/st .

FASB has published two exposure drafts (EDs) in October intended to improve the accounting and disclosures for mergers and acquisitions by not-for-profit organizations.

The first exposure draft, Not-for-Profit Organizations: Mergers and Acquisitions, would eliminate the use of the pooling-of-interests method of accounting for all mergers and acquisitions by not-for-profits, and require the application of the acquisition method. The second, Not-for-Profit Organizations: Goodwill and Other Intangible Assets Acquired in a Merger or Acquisition, would require such entities to provide consistent and comparable information about identifiable intangible assets they acquire in a merger or acquisition. They also must provide more relevant information about events that result in impairment of goodwill acquired by the not-for-profit organization. The proposed guidance is consistent with the accounting for all other acquired intangible assets—whether purchased or donated and whether acquired individually or as part of a group. The comment deadline for the proposals, which can be downloaded at www.fasb.org/draft/major_standards_projects_ed.shtml , is January 29.

According to the FASB news release announcing the proposals, recent estimates suggest the total asset base of the U.S. not-for-profit sector would make it the sixth largest economy in the world. Similar studies suggest such organizations’ financial results in 2003 represented approximately 9% of the U.S. gross domestic product.

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