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CCH® PENSION AND BENEFITS — 9/1/06

FASB to require pension measurement date be same as corporate year-end

The Financial Accounting Standards Board (FASB) has decided to require companies to measure their obligations from defined benefit plans and other postretirement plans as of the date of the employer's statement of financial position. Consequently, companies with calendar-year fiscal years will measure their pension obligations as of December 31 instead of the previously permitted 90-day window (September 30 for a December 31 corporate year). The requirement is part of the FASB's exposure draft on accounting for postretirement benefits (see CCH Pension Plan Guide Newsletter, Report No. 1627, April 10, 2006).

Implementation date postponed

Following an extensive discussion, the FASB agreed to postpone implementation of the measurement date decision until years ending after December 15, 2008. One board member stated that alignment of the measurement dates is important to avoid the possibility of large changes in the value of the plans during the current 90-day window. The board members generally were not sympathetic to administrative concerns caused by making the measurement dates the same. "It is more of an issue of advance planning," noted one board member.

The FASB's postponement to 2008 applies only to the measurement date decision. The other provisions of the FASB's exposure draft on accounting for postretirement benefits will be effective for years ending after December 15, 2006. The effective date for nonpublic companies would use a 15-month phase-in alternative, but would start one year earlier. The FASB staff provided the following example (modified to reflect the new measurement date): "For example, a calendar-year company currently using a Sept. 30, 2007, measurement date would measure the assets and liabilities at Sept. 30, 2007, for the Dec. 31, 2007, financial statements. The Sept. 30, 2007, measurement would also be used to determine net benefit cost for the following 15 months (from Sept. 30, 2007, through Dec. 31, 2008). The first three months' net benefit cost would be an adjustment to retained earnings as of the effective date of the measurement date provisions, and the next 12 months' net benefit cost would be 2008 expense. The next measurement, at Dec. 31, 2008, would be used for the Dec. 31, 2008, financial statements and 2009 expense."

For more information on this and related topics, consult the CCH Pension Plan Guide.

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