Wiley GAAP: Practical Implementation Guide and Workbook

Chapter 25. ACCOUNTING AND REPORTING BY RETIREMENT BENEFIT PLANS (ASC 960 AND 962)

INTRODUCTION

ASC 960 and 962 deal with defined benefit pension plans and defined contribution pension plans, respectively. The Standards set out the form and content of the general-purpose financial reports of retirement benefit plans. The Standards apply to

• Defined contribution plans. Where benefits are determined by contributions to the plan together with investment earnings thereon.

• Defined benefit plans. Where benefits are determined by a formula based on employees' earnings and/or years of service.

ASC 960 and 962 are sometimes confused with ASC 715, because both Standards address employee benefits. But there is a difference: While ASC 960 and 962 address the financial reporting considerations for the benefit plan itself, as the reporting entity, ASC 715 deals with employers' accounting for the cost of such benefits as they are earned by the employees. These Standards are thus somewhat related, but there will not be any direct interrelationship between amounts reported in benefit plan financial statements and amounts reported under ASC 715 by employers.

DEFINITIONS OF KEY TERMS

Actuarial present value. Value, as of a specified date, of an amount or series of amounts payable or receivable thereafter, with each amount adjusted to reflect (1) the time value of money (through discounts for interest) and (2) the probability of payment (by means of decrements for events such as death, disability, withdrawal, ...