Later this year, some companies will be required to change the way they present expenses related to retirement benefits. The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which is intended to improve the presentation of pension costs.
The amended guidance requires companies to report expenses for employees’ pensions under the same line as other compensation costs. The other pension-related expenses mentioned in FASB ASC 715-30-35-04, Compensation—Retirement Benefits — Defined Benefit Plans — Pension — Subsequent Measurement — Components of Net Periodic Pension Cost, formerly Statement of Financial Accounting Standards No. 87, and FASB Accounting Standards Codification 715-30-35-09, Compensation—Retirement Benefits — Defined Benefit Plans — Pension — Subsequent Measurement — Interest Cost, including interest costs, amortization of pension-related expenses from previous periods, and the gains or losses on plan assets, must be disclosed separately and excluded from the operating income subtotal.
Public companies must apply the accounting changes to annual reporting periods beginning after December 15, 2017, and to quarterly periods in 2018. Private companies will be required to apply the changes to annual reporting periods beginning after December 15, 2018, and to quarterly periods and other periods of less than a year that start after December 15, 2019.
Early adoption of the standard is permitted. A footnote disclosure will also be required to explain the amendments.
