Pension strategy must be revealed

FASB revises rule for company plans

December 25, 2003|By BLOOMBERG NEWS

NORWALK, Conn. - Companies with pension plans will be required to describe their basic investment strategy for the first time under a revised rule issued by the Financial Accounting Standards Board.

Under the rule, known as FASB Statement No. 132 (revised 2003), companies will have to identify the asset categories, such as stocks, bonds or real estate, in which they have invested pensioners' money and list the expected rate of return for the fund.

Companies will also have to estimate how they must pay pensioners in the current year and the amount that must be paid into the fund to keep it from running short. In addition to expanded annual disclosures, the revised pension standard will require companies to report pension and other post-retirement benefit costs on a quarterly basis.

"Many users of financial statements told the board that the information provided for defined benefit pension plans was not adequate," the Norwalk, Conn.-based FASB said yesterday. The rule revises FASB statements 87, 88 and 106.

Standard & Poor's estimated that the amount of pension underfunding for companies in the S&P 500 index grew to $259 billion this year from $212 billion.

The total amount in S&P 500 pension funds grew to $1.06 trillion from $951 billion at the end of 2002, the credit-rating company said. In the same period, pension obligations rose to $1.32 trillion from $1.16 trillion, S&P said.

On Dec. 12, General Motors Corp. said it eliminated most of its $19.3 billion U.S. pension deficit, the largest among U.S. companies at the end of last year, and said it will pay $1.1 billion less in pretax pension costs in 2004.

GM, the No. 1 automaker, and Ford Motor Co., which is No. 2, racked up the biggest deficits among U.S. companies after promising lifetime benefits to hundreds of thousands of employees.

The new FASB standard will take effect for fiscal years ending after Dec. 15, 2003, and for the first fiscal quarter of the year after initial application of the annual disclosure requirements.

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