Overshadowed by the FASB Revenue Recognition Exposure Draft, the FASB Proposed Accounting Standards Update–Compensation–Retirement Benefits–Multi-Employer Plans has been flying under the radar. In March 2010, the FASB chairman announced the addition of a new project aimed at expanding disclosures about an employer’s participation in a multi-employer plan (that is, pension and other post-retirement benefits). The project was added in response to concerns raised by several constituents about the current disclosures for multi-employer plans. Among the concerns raised is the lack of information in the financial statements, beyond the contributions made, about an employer’s participation in a multi-employer plan. Additionally, several users have published reports highlighting these concerns, including the potential for increases in contributions as a result of plans being underfunded. The funded status of many of these plans deteriorated significantly during the financial crisis of 2008 when plan asset values dropped significantly. It is envisioned that expanded disclosures would enable users of financial statements to better assess the risks a reporting entity faces by participating in a multi-employer plan. The comment period ended on November 1, 2010.
I’m for transparent disclosure; however, the cost and timeliness to produce this information far outweighs the benefits. It is expected that it could cost as little as $500 per plan to as much as $5,000 per plan to gather this information. Multiply that by 5 or 7 for the multiple plans that construction companies generally have, and you can easily see that this cost is definitely not insignificant. Now combine that cost with the fact that each plan has its own plan-specific information and benefits. This complicated task of assembling the specific plan items for each specific company will take time to accurately prepare. Thus, the timeliness of the final issuance of the financial statements will likely be delayed.
Let’s hope all the comments recommending that the FASB defer, reduce or eliminate this disclosure have some effects. The FASB’s goal is to finalize this standard in the second quarter of 2011. If you have any questions on these proposed updates, please contact Ted Pettko at firstname.lastname@example.org.
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