Financial Reporting for Defined Benefit Pension Plans and Note Disclosures
for Defined Contribution Plans
(Issued 11/94)
Summary
This Statement establishes financial reporting standards for defined benefit
pension plans and for the notes to the financial statements of defined
contribution plans of state and local governmental entities. Financial reporting
standards for post-employment healthcare plans administered by defined benefit
pension plans and for the pension expenditures/expense of employers are
included, respectively, in two related Statements: No. 26, Financial
Reporting for Post-employment Healthcare Plans Administered by Defined Benefit
Pension Plans, and No. 27, Accounting for Pensions by State and Local
Governmental Employers.
The standards in this Statement apply for pension trust funds included in the
financial reports of plan sponsors or employers as well as for the stand-alone
financial reports of pension plans or the public employee retirement systems
that administer them. Reduced disclosures are acceptable for pension trust funds
when a stand-alone plan financial report is publicly available and contains all
required information.
This Statement establishes a financial reporting framework for defined
benefit pension plans that distinguishes between two categories of
information: (a) current financial information about plan assets and financial
activities and (b) actuarially determined information, from a long-term
perspective, about the funded status of the plan and the progress being made in
accumulating sufficient assets to pay benefits when due.
Plans should include information in the first category in two financial
statements: (a) a statement of plan net assets that provides information
about the fair value and composition of plan assets, plan liabilities, and plan
net assets and (b) a statement of changes in plan net assets that
provides information about the year-to-year changes in plan net assets. The
requirements for the notes to the financial statements include a brief plan
description, a summary of significant accounting policies, and information about
contributions, legally required reserves, and investment concentrations.
Information in the second category should be included, for a minimum of six
years, in two schedules of historical trend information that should be presented
as required supplementary information immediately after the notes to the
financial statements. The required schedules are (a) a schedule of funding
progress that reports the actuarial value of assets, the actuarial accrued
liability, and the relationship between the two over time and (b) a schedule
of employer contributions that provides information about the annual
required contributions of the employer(s) (ARC) and the percentage of the ARC
recognized by the plan as contributed. Note disclosures related to the required
schedules should be presented after the schedules and should include the
actuarial methods and significant assumptions used for financial reporting.
Plans may elect to report one or more years of the information required for
either or both schedules in an additional financial statement(s) or in the notes
to the financial statements. Information for all required years also should be
reported as required supplementary information, unless all years are included in
the additional statement(s) or notes.
Plans should measure all actuarially determined information included in their
financial reports in accordance with certain parameters. The parameters include
requirements for the frequency and timing of actuarial valuations as well as for
the actuarial methods and assumptions that are acceptable for financial
reporting. When the methods and assumptions used in determining a plan's funding
requirements meet the parameters, the same methods and assumptions are required
for financial reporting by both a plan and its participating employer(s).
This Statement requires the notes to the financial statements of defined
contribution plans to include a brief plan description, a summary of
significant accounting policies (including the fair value of plan assets, unless
reported at fair value), and information about contributions and investment
concentrations.
The provisions of this Statement are effective for periods beginning after
June 15, 1996. Early implementation is encouraged; however, Statement 26, if
applicable, should be implemented in the same fiscal year.