ACCOUNTING & AUDITING ARTICLE-
SFAS 158 (ASC 715) – Employers’ Accounting for Defined Benefit Pension and Other Post-Retirement Plans

The following summarizes SFAS 158 (Included in ASC 715) impact on financial statement presentation.

There are two primary changes in financial reporting as a result of SFAS 158 that affected clients:

• The over funded / underfunded status of a Defined Benefit plan must be recorded as an asset / liability on the company’s balance sheet
• The funded status of a plan must be measured as of a company’s reporting date.

1. The over funded / underfunded status of a Defined Benefit plan is measured as the difference between the plan assets at fair value and the projected benefit obligation (PBO).

For other post-retirement benefit plans, other than a pension plan, this is the difference between the plan assets at fair value and the accumulated post-retirement benefit obligation.

The difference between the over/under funded status and what was recognized as a prepaid asset or accrued liability under the old rules is due primarily to including the estimated impact of future salary increases.

This information is obtained from an actuary’s report.

The over / under funded amount should be booked on the company’s balance sheet and recognized as other comprehensive income, net of tax.

An underfunded amount should be recognized as a long-term liability, except in the unusual situation where total assets of the plan are less than the amount of benefits that will be paid to participants over the next 12 months. An over funded amount will always be recognized as a non-current asset.

2. The measurement date for the over / under funded status must be the reporting date for the Company. In other words, for clients with a calendar year plan, and a September fiscal year, they must have an actuarial evaluation performed mid year (at the reporting date) to value the over/ under funded status.

This was effective l for years ending after 12-15-08.

In the year of change, required disclosures included:

• The incremental effect of applying the standard by line item (in the footnotes)
• It is not necessary to include accounting changes (correction of an error) disclosures

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