Why The Pension Obligation That A Company Should Report On The Financial Statements

1372 Words Nov 18th, 2015 6 Pages
There is a major accounting controversy when it comes to pension plans. That controversy is “What is the pension obligation that a company should report in the financial statements?” (D. E. Kieso) A new statement issued in October 2015 states that employers will now have to report net pension liabilities in their financial statements as well as pension expenses and any other resources. This all comes from GASB statement No.68. (GASB).
When financial reporting is provided, the purpose of it is to clarify and easily report the current funded status of the planned assets. The Board (side A) will say that any employer who does not use the measures from the fiscal year end, could incur future costs when finally applying the requirement of the planned assets.
The board says that all overfunded plans need to be combined and shown as a pension asset on the balance sheet. The underfunded plans should be combined and shown as only one amount on the balance sheet.
The employer (side B) will argue that measures do not necessarily have to be used from the fiscal year end for reporting purposes. Some Employers agree that a company’s pension obligation is the deferred compensation obligation it has to their employees for the term of their services in accordance with the terms of the pension plans.
Some employers agree that because returns on pension assets are not taxed, then the assets would benefit from being invested in heavily taxed securities and that preference would be for…

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