(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

FASB Seeks Enhanced Pension Disclosures

In an attempt to provide information that is useful in evaluating plan assets, obligations and pension costs, including associated risks that may impact future earnings and cash outflows, the Financial Accounting Standards Board has decided to amend its Statement 132 to require additional disclosures about defined benefit pension plans. The decision by the board is subject to change following the issuance of an exposure draft of the changes and public comment. According to FASB, the new disclosure requirements are expected to be effective for fiscal years ending after December 15, 2003.

The board stated that current reporting requirements for pensions do not always provide users with a clear picture of the status and health of a company's defined benefit pension plans. In addition, the board stated that these concerns have been heightened by the decline in equity markets, the exposure of plan assets to further risk and the need for more information about cash outflows to fund plan commitments.

Under the board's tentative decision, enhanced disclosures would be required on a quarterly basis, as compared to the current annual disclosure requirement. Additional disclosures would be required with regard to: 1) the types of assets owned and the amounts, measured at fair value, for each period that a balance sheet is presented, grouped into broad categories such as equity securities, debt securities, real estate, securities of the plan sponsor and other assets, 2) the target allocation of assets based on investment strategies and policies, 3) the expected long-term rate of return on assets for each asset category, 4) investment maturities, 5) the amount of net pension cost by income statement line, and 6) information about the pension obligation and future cash outflows, for both pension benefits and contributions to the pension trust.

The board stated that in a future meeting, it will discuss whether these disclosures should be applied uniformly to all companies or whether the requirements should differ for nonpublic companies. Additionally, the board will consider other specific issues related to disclosures, including the types of plan assets to be separately disclosed, sensitivity information about changes to key assumptions and interim period disclosures. FASB's stated goal is to issue an exposure draft in the third quarter of this year and a final statement in December 2003.