The US Governmental Accounting Standards Board (GASB) has issued two exposure drafts to amend existing pension reporting standards.
The drafts aim to improve state and local government’s financial reporting of pensions by proposing a more transparent way to calculate and report costs and obligations.
“Users of state and local government financial reports have told the GASB that current standards do not provide enough information to adequately understand the cost and the liability for benefits promised to active and retired employees,” GASB chairman Robert Attmore explained.
In the first draft, Pensions Exposure Draft, the GASB proposes to introduce a net pension liability, which is the difference between the total pension liability and net assets set aside in a qualified trust to pay benefits to current employees, retirees, and their beneficiaries.
Other proposals includes: Immediate recognition of more components of pension expense; use of a discount rate; a single actuarial cost allocation method; and more extensive note disclosures and supplementary information.
The GASB said the amendments also address situations in which another entity contributes to a government’s pension plan on behalf of the employer and addresses accounting and financial reporting for employers providing pensions through defined contribution plans.
The second, Pension Plan Exposure Draft, addresses financial reporting for plans that are administered through qualified trusts. It outlines the basic framework for the separately issued financial reports of defined benefit pension plans and also details proposed note disclosure requirements for defined contribution pension plans.
The deadline for written comment is 30 September.
The GASB will also host three public hearings on the drafts on 3, 13 and 20 October as well as three user discussion forums on 4, 14 and 21 October.