US - The Financial Accounting Standards Board (FASB) has updated guidance over increasing transparency in the financial reporting of companies with multiemployer pensions.
The Exposure Draft of the proposed Accounting Standards Update clarifies recommendations that the FASB believes would help investors better assess the potential risks faced by employers participating in multiemployer plans.
In the US, the generally accepted accounting principles (GAAP) requires employers to disclose their total contribution to multiemployer plans, but there is no requirement to describe the funding status of those plans.
The Board said a recent study of over 100 multiemployer plans, including the largest plans in the country measured by assets, indicated that in 2008 those plans were collectively under-funded by over $160bn - or 44% of their collective liabilities.
Under the proposed guidance, employers would have to provide more information, including a description of the plans in which the employer is involved, the employer's contractual commitments to the plans, and the expected impact of participating in the plans on the employer's future cash flows - including the potential impact of plan withdrawal obligations.
"Investors and other financial statement users have expressed concern that current financial statements do not provide enough information about the commitments and potential risk related to multiemployer pension arrangements," said FASB member Leslie Seidman.
"We encourage our constituents to review and provide comment on the Board's suggestions for expanding disclosure in this area, one that has gained greater urgency as a result of the recent financial crisis and under-funding of many such plans."
If approved, the proposed update would require a public company to provide the enhanced disclosures for fiscal years ending after December 15, 2010, and in subsequent fiscal years.
A non-public company would be required to provide the enhanced disclosures for fiscal years beginning on or after December 15, 2010, and in subsequent fiscal years.
The Next Generation Pensions Committee is on a mission to promote and encourage younger voices in the industry. Kim Kaveh looks at its key objectives
This week's top stories included an analysis finding the cost of equalising guaranteed minimum pensions in schemes could hit FTSE 100 profits by up to £15bn.
Employers whose dividend to deficit recovery contribution (DRCs) ratios fall outside the "normal range" should expect to see higher regulatory scrutiny, although no fixed ratio will be set.
Investment consultants and fiduciary managers should expect a final decision on the investigation into the market to be published by the end of the year, the competition watchdog says.