FASB changes employee benefit plan accounting

FASB provided guidance designed to simplify accounting for employee benefit plans in a three-part document.

The guidance is contained in Accounting Standards Update (ASU) No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (consensuses of the Emerging Issues Task Force).

Part I of the ASU designates contract value as the only required measure for fully benefit-responsive investment contracts and applies only to reporting entities within the scope of Topics 962 and 965 that classify investments as fully benefit-responsive investment contracts.

In Part II of the ASU, FASB eliminated certain disclosures that previously were required for participant-directed investments and nonparticipant-directed investments. In Part III of the ASU, FASB established a practical expedient to permit plans to measure investments and investment-related accounts as of a month-end date that is closest to the plan’s fiscal year end, when the fiscal period does not coincide with a month end.

The amendments in each part of the ASU take effect for fiscal years beginning after Dec. 15, 2015, with earlier application permitted. The amendments in Parts I and II should be applied retrospectively for all financial statements presented. The amendments in Part III should be applied prospectively.