Financial Reporting

  FASB completed redeliberations on a revised accounting standard it said will provide more information about an employer’s financial obligations to multiemployer pension plans. Previously, employers were required to disclose only their total contributions to all multiemployer plans in which they participate.


FASB said it expected that the final Accounting Standards Update would be prepared and published in September. The revisions are based on a proposal the board issued in September 2010. The ED is available at


But the board, responding to commenters’ concerns, deleted from the final standard a requirement that employers disclose their withdrawal liability to all plans in which they participate. FASB posted an action alert ( and a FASB in Focus analysis ( to summarize the main elements of the disclosures.


Multiemployer pension plans commonly are used by an employer to provide benefits to union employees who may work for many employers during their working life, thereby enabling them to accrue benefits in a single pension plan for their retirement.


“Historically, very limited information about these plans has been disclosed, even though they may represent significant potential obligations for many large, unionized industries such as trucking, supermarket chains and construction firms,” said FASB Chairman Leslie Seidman in a press release.


The AICPA’s Private Companies Practice Section (PCPS) Technical Issues Committee (TIC) submitted comments on the proposal in November. TIC said it supported the proposal as a necessary step to improve disclosure of an employer’s involvement in a multiemployer plan. However, TIC had concluded that the ED included certain required disclosures that would be unnecessary for public and private employers and that may have cost implications for the plans that would need to supply many of the proposed disclosures to participating employers. TIC’s comments are available at


Among disclosures that TIC had recommended against requiring and that were deleted from the final rule include: (1) whether the employer is or is not represented on the board of trustees of the plan(s) or a similar body; and (2) expected contributions for the next annual period.


The final rule also would allow employers to omit reporting certain quantitative information to the extent it is not available without undue cost. The employer would be required to describe what information it omitted and why.


FASB decided to delete from its original proposal the requirement that employers disclose their withdrawal liability to all plans in which they participate, or provide a “point-in-time” estimate of their obligations with respect to the underfunded status of individual plans. FASB said many commenters told the board that the withdrawal liability would not be an appropriate proxy for an employer’s proportional share of the underfunded status of the plan. They suggested that the employer’s share of the underfunded status of the plan can only be determined through the collective bargaining process, and they urged FASB not to require a “point-in-time” estimate of an employer’s obligations with respect to underfunding.


Essential elements of the disclosures required for individually material plans include:

  • An indication of whether the employer’s contributions represent more than 5% of total contributions to the plan.
  • An indication of which plans, if any, are subject to a funding improvement plan.
  • The expiration date(s) of collective bargaining agreement(s) and any minimum funding arrangements.
  • The most recent certified funded status of the plan, as determined by the plan’s so-called “zone status,” which is required by the Pension Protection Act of 2006. If the “zone status” is not available, an employer will be required to disclose whether the plan is:
    • Less than 65% funded
    • Between 65% and 80% funded
    • Greater than 80% funded.


In addition, required disclosures for all plans include:

  • The amount of employer contributions made to each individually material plan and to all plans in the aggregate.
  • A description of the nature and effect of any changes affecting comparability for each period in which a statement of income is presented.


For public entities, the enhanced disclosures will be required in fiscal years ending after Dec. 15, 2011. For nonpublic entities, the enhanced disclosures will be required in fiscal years ending after Dec. 15, 2012.



  FASB said it is hosting two public round-table meetings in October to discuss issues relating to existing private company accounting and reporting standards. The meetings, scheduled for Oct. 11 and Oct. 17, will discuss issues including accounting and disclosure requirements relating to variable-interest entities, interest rate swaps and level 3 fair value measurements.


FASB Chairman Leslie Seidman said in a press release that the purpose of the meetings is to “engage in a constructive dialogue about private company accounting and reporting issues on existing GAAP with a wide variety of stakeholders, including private companies, their CPA practitioners, and users of private company financial statements.


“The board and staff found that the two round tables we held last fall were valuable forums for hearing firsthand from private company constituents about their concerns with existing GAAP,” she said. “Those round tables provided the impetus for our efforts to develop a differential reporting framework for private companies and our project to simplify goodwill impairment assessments.”


A Blue Ribbon Panel sponsored by the AICPA, the Financial Accounting Foundation (FASB’s parent organization) and the National Association of State Boards of Accountancy met throughout 2010 and, in January 2011, finalized recommendations on private company financial reporting. The two most significant Blue Ribbon Panel recommendations are that:

  • A new, separate board with standard-setting authority be established under the oversight of FAF. The board would coordinate activities with FASB but not be subject to FASB approval.
  • Changes and modifications be made to existing and future GAAP that recognize the unique needs of users of private company financial statements. All such changes would reside in the FASB Accounting Standards Codification.


The AICPA supports the panel’s main recommendations that change in financial reporting for private companies is long overdue and that a separate, autonomous standard-setting body is necessary for effective private company reporting to become a reality.


FAF Trustees discussed the panel’s recommendations at a February 2011 meeting and formed a Trustee Working Group in March to address accounting standard setting for nonpublic entities and gather public input.


The first FASB round-table meeting is scheduled for Oct. 11, 10 a.m. to 1 p.m. (CDT), at the Renaissance Chicago O’Hare Suites Hotel in Chicago. The second meeting is scheduled for Oct. 17, 9 a.m. to noon (PDT), in San Francisco (specific location to be determined).


Anyone interested in observing a meeting must pre-register at Due to limited seating, no more than three observers from the same organization may attend. The sessions will be recorded for playback on FASB’s webcast archive at



  FASB issued an Accounting Standards Update (ASU) containing amendments that require health care entities to change the presentation of their statement of operations by reclassifying the provision for bad debts associated with patient service revenue from an operating expense to a deduction from patient service revenue (net of contractual allowances and discounts). Health care entities that recognize significant amounts of patient service revenue at the time services are rendered, even though the entities do not assess a patient’s ability to pay, will be affected by the change.


ASU no. 2011-07, Health Care Entities (Topic 954), Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities (a consensus of the FASB Emerging Issues Task Force), requires those health care entities to provide enhanced disclosure about their policies for recognizing revenue and assessing bad debts. The amendments also require disclosures of patient service revenue (net of contractual allowances and discounts) as well as qualitative and quantitative information about changes in the allowance for doubtful accounts.


The ASU says that, under current practice, some health care entities recognize patient service revenue when services are rendered regardless of whether the entity expects to collect that amount. Stakeholders raised concerns that such accounting practices result in a gross-up of patient service revenue and the related provision for bad debts. The ASU says its objective is to provide financial statement users with greater transparency about a health care entity’s net patient service revenue and the related allowance for doubtful accounts.


The amendments change the presentation of the statement of operations and add disclosures that are not required under current GAAP for entities within the scope of the ASU. The provision for bad debts associated with patient service revenue for certain entities is required to be presented on a separate line as a deduction from patient service revenue (net of contractual allowances and discounts) in the statement of operations.


For public entities, the amendments in the ASU are effective for fiscal years and interim periods within those fiscal years beginning after Dec. 15, 2011, with early adoption permitted. For nonpublic entities, the amendments are effective for the first annual period ending after Dec. 15, 2012, and interim and annual periods thereafter, with early adoption permitted. The amendments to the presentation of the provision for bad debts related to patient service revenue in the statement of operations should be applied retrospectively to all prior periods presented. The disclosures required by the amendments should be provided for the period of adoption and subsequent reporting periods. The ASU is available at


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