FASB Eases Accounting Requirements for Employee Benefit Plans
The Financial Accounting Standards Board (FASB) has simplified certain aspects of employee benefit plan (EBP) financial reporting, including presentation, measurement and disclosures. As with all simplification standards, the amendments are intended to reduce the work of EBP preparers while retaining information relevant to plan financial statement users. The final three-part Accounting Standards Update (ASU) 2015-12 amends the accounting for defined benefit pension plans (Topic 960), defined contribution pension plans (Topic 962) and health and welfare benefit plans (Topic 965).
Part I, Fully Benefit-Responsive Investment Contracts, simplifies the measurement of fully benefit-responsive investment contracts (FBRIC), requiring EBPs to measure, present and disclose FBRICs only at contract value. The majority of plans report FBRICs on Form 5500, Annual Return/Report of Employee Benefit Plan, at contract value, making the amendments a welcome relief. The amendments eliminate the current requirement to reconcile the contract amount to fair value on the face of the financial statements, as well as the related Accounting Standards Codification (ASC or Topic) 820 fair value disclosures. EBPs will continue to provide disclosures that help users understand the nature and risks of the FBRICs, including a description of the events that would cause the plan to transact at an amount different from contract value. The update also eliminates certain disclosures required under plan accounting requirements of ASC 962 and ASC 965 for FBRICs.