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.
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