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June 25, 2012

US GASB approves public pension reporting standards

The US Governmental Accounting Standards Board (GASB) has approved two standards for the reporting of unfunded pension liabilities by US state and local governments that provide defined benefit pensions.

In statement No. 67, Financial Reporting for Pension Plans, the GASB has revised existing guidance for the financial reports of most pension plans. In Statement No. 68, Accounting and Financial Reporting for Pensions, the standard setter amends financial reporting requirements for governments that provide their employees with pension benefits.

The GASB explained that governments will have to disclose a “net pension liability” on their balance sheets, meaning recognition of more pension expense than is currently required. This includes annual service cost and interest on the pension liability, plus the effect of changes in benefit terms on the net pension liability.

GASB chairman Robert Attmore said the standards will improve the way state and local governments report their pension liabilities and expenses, resulting in a more faithful representation of the full impact of these obligations.

“Among other improvements, net pension liabilities will be reported on the balance sheet, providing citizens and other users of these financial reports with a clearer picture of the size and nature of the financial obligations to current and former employees for past services rendered,” Attmore said.

 

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