Recently Issued Technical Questions and Answers 


    Below, the AICPA will post recent technical staff questions and answers issued since July 2014. The questions and answers in this section are not sources of established authoritative principles. This material is based on selected practice matters identified by the staff of the AICPA's Technical Hotline and various other bodies within the AICPA and has not been approved, disapproved, or otherwise acted upon by any senior committee of the AICPA. Consult Technical Practice Aids for all technical staff questions and answers issued by the AICPA.

    If you have specific questions about information contained in a TIS section, contact the AICPA's Technical Hotline.

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    TIS Section Title Issue Date
    6931.18 Definition of “Imminent” Under Liquidation Basis of Accounting for Single-Employer Defined Benefit and Defined Contribution Retirement Employee Benefit Plans September 2014
    6931.19 Applicability of Using Liquidation Basis of Accounting for Partial Plan Terminations or Plan Mergers for Single-Employer DB Plans September 2014
    6931.20 Use of Beginning-of-Year Benefit Information Date Versus End-of-Year Benefit Information Date When Using the Liquidation Basis of Accounting for Single-Employer DB Plans September 2014
    6931.21 Presentation of the Actuarial Present Value of Accumulated Plan Benefits of Single-Employer DB Plans When Using the Liquidation Basis of Accounting September 2014
    6931.22 Contribution Receivable From the Plan Sponsor in a Standard Termination of a Single-Employer DB Plan September 2014
    6931.23 Overfunded Single-Employer DB Plan When Using the Liquidation Basis of Accounting September 2014
    6931.24 Accrued Costs When Using the Liquidation Basis of Accounting for a Single-Employer DB Plan September 2014
    6931.25 Accrued Income When Using the Liquidation Basis of Accounting for a Single-Employer DB Plan September 2014
    6931.26 Comparative Financial Statements When Using the Liquidation Basis of Accounting of a Single-Employer DB Plan September 2014
    6931.27 Presentation of a Stub Period in a Single-Employer DB Plan When Using the Liquidation Basis of Accounting September 2014
    6931.28 Presentation of Fully Benefit-Responsive Investment Contracts in Single-Employer DC Plans When Using the Liquidation Basis of Accounting September 2014
    6931.29 FASB ASC 820 Fair Value Disclosure When an Employee Benefit Plan is Using the Liquidation Basis of Accounting September 2014
    6931.30 Single-Employer DB Plan Disclosures When Using the Liquidation Basis of Accounting September 2014
    8900.11 Management Representations Regarding Prior Periods Presented That Were Audited by Predecessor Auditor
    September 2014

    Technical Practice Aids

    Accounting Questions and Answers

    TIS Section 6931.18, "Definition of “Imminent” Under Liquidation Basis of Accounting for Single-Employer Defined Benefit and Defined Contribution Retirement Employee Benefit Plans" (Issue Date: September 2014)

    Inquiry — “Pending Content” in paragraph 2 of FASB Accounting Standards Codification (ASC) 205-30-25, Presentation of Financial Statements–Liquidation Basis of Accounting, states that liquidation is imminent when either of the following occurs:

    a. A plan for liquidation has been approved by the person or persons with the authority to make such a plan effective, and the likelihood is remote that any of the following will occur:
    1. Execution of the plan will be blocked by other parties.
    2. The entity will return from liquidation.
    b. A plan for liquidation is imposed by other forces (for example, involuntary bankruptcy), and the likelihood is remote that the entity will return from liquidation.
    For a single-employer defined benefit pension plan (DB plan) or defined contribution retirement plan (DC plan), could liquidation be considered imminent upon approval by the governing body with authority over the plan (for example, board approval or executed plan amendment)?

    (Although the information contained in the following reply is specific to single-employer DB and DC plans, the information may be relevant when considering the termination of a single-employer health and welfare benefit plan, or a multiemployer plan.)

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    TIS Section 6931.19, "Applicability of Using Liquidation Basis of Accounting for Partial Plan Terminations or Plan Mergers for Single-Employer DB Plans" (Issue Date: September 2014)

    Inquiry — Is a single-employer DB plan required to apply the liquidation basis of accounting in accordance with FASB ASC 205-30-25 in either of the following situations?

    a. The DB plan is partially terminated (for example, an employer closes a particular plant or division that results in the termination of employment of a substantial portion of DB plan participants, or an employer stops or reduces future benefit accruals under a DB plan). b. A DB plan ceases to exist by merging into a successor plan.

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a DC plan, a health and welfare plan, or a multiemployer plan.)

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    TIS Section 6931.20, "Use of Beginning-of-Year Benefit Information Date Versus End-of-Year Benefit Information Date When Using the Liquidation Basis of Accounting for Single-Employer DB Plans" (Issue Date: September 2014)

    Inquiry — Paragraph 4 of FASB ASC 960-205-45 permits the actuarial present value of accumulated plan benefits to be presented as of the beginning or end of the plan year; however, an end-of-year benefit information date is considered preferable. When a single-employer DB plan uses a beginning-of-year benefit information date and is required to prepare its financial statements using the liquidation basis of accounting in accordance with FASB ASC 205-30, is the DB plan required to change to an end-of-year benefit information date?

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    TIS Section 6931.21, "Presentation of the Actuarial Present Value of Accumulated Plan Benefits of Single-Employer DB Plans When Using the Liquidation Basis of Accounting" (Issue Date: September 2014)

    Inquiry — Paragraph 2 of FASB ASC 960-20-45 permits the information regarding a defined benefit pension plan’s actuarial present value of accumulated plan benefits and changes therein to be presented on the face of one or more financial statements or in the notes thereto.

    When a single-employer DB plan prepares its financial statements using the liquidation basis of accounting in accordance with FASB ASC 205-30, may the DB plan continue to choose to report obligations either in a separate financial statement, combined with the statement of net assets available for benefits and the year-to-year changes therein, or in the notes to the financial statements?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer defined benefit health and welfare plan as it relates to its benefit obligations, or a multiemployer plan.)

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    TIS Section 6931.22, "Contribution Receivable From the Plan Sponsor in a Standard Termination of a Single-Employer DB Plan" (Issue Date: September 2014)

    Inquiry — When using the liquidation basis of accounting in accordance with FASB ASC 205-30 for a standard termination, should a single-employer DB plan record a contribution receivable from the plan sponsor for the amount that the plan sponsor is expected to contribute to the plan as part of its obligation to settle the plan?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer DC plan, a health and welfare plan, or a multiemployer plan.)

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    TIS Section 6931.23, "Overfunded Single-Employer DB Plan When Using the Liquidation Basis of Accounting" (Issue Date: September 2014)

    Inquiry — Should an overfunded single-employer DB plan that is using the liquidation basis of accounting, in accordance with FASB ASC 205-30, and expects to have excess assets, accrue the excess assets as a payable to the plan sponsor?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer DC plan, a health and welfare plan, or a multiemployer plan.)

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    TIS Section 6931.24, "Accrued Costs When Using the Liquidation Basis of Accounting for a Single-Employer DB Plan" (Issue Date: September 2014)

    Inquiry — “Pending Content” in paragraph 7 of FASB ASC 205-30-25 states that an entity should accrue costs and income that it expects to incur or earn through the end of its liquidation if and when it has a reasonable basis for estimation. Would a single-employer DB plan accrue estimated future expenses such as trustee fees, audit fees, actuarial fees, and PBGC premiums?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer DC plan, a health and welfare plan, or a multiemployer plan.)

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    TIS Section 6931.25, "Accrued Income When Using the Liquidation Basis of Accounting for a Single-Employer DB Plan" (Issue Date: September 2014)

    Inquiry — “Pending Content” in paragraph 7 of FASB ASC 205-30-25 states that an entity should accrue costs and income that it expects to incur or earn through the end of its liquidation if and when it has a reasonable basis for estimation. Would a DB plan accrue income related to estimated earnings on the investments held by the DB plan?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer DC plan, a health and welfare plan, or a multiemployer plan.)

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    TIS Section 6931.26, "Comparative Financial Statements When Using the Liquidation Basis of Accounting of a Single-Employer DB Plan" (Issue Date: September 2014)

    Inquiry — “Pending Content” in paragraph 2 of FASB ASC 205-30-45 states that the liquidation basis of accounting should be applied prospectively from the day that liquidation becomes imminent. ERISA requires comparative statements of net assets available for benefits and a full year statement of changes in net assets available for benefits. Is a single-employer DB plan able to present the current year financial statements in liquidation comparatively on the same financial statements with the prior period statements prepared on the ongoing plan basis?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer DC plan, a health and welfare plan, or a multiemployer plan.)

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    TIS Section 6931.27, "Presentation of a Stub Period in a Single-Employer DB Plan When Using the Liquidation Basis of Accounting" (Issue Date: September 2014)

    Inquiry — In accordance with ”Pending Content” in paragraph 2 of FASB ASC 205-30-45 , the initial statement of changes in net assets in liquidation should present only changes in net assets that occurred during the period since liquidation became imminent. The FASB ASC does not provide guidance about whether an entity should present information for the period of time that preceded the determination that liquidation is imminent (referred to as a stub period). Is a single-employer DB plan required to present a stub period for the period of time that preceded the determination that liquidation is imminent?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer DC plan, a health and welfare plan, or a multiemployer plan.)

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    TIS Section 6931.28, "Presentation of Fully Benefit-Responsive Investment Contracts in Single-Employer DC Plans When Using the Liquidation Basis of Accounting" (Issue Date: September 2014)

    Inquiry — Should single-employer DC plans that hold fully benefit-responsive investment contracts present both fair value and contract value on the face of the financial statements, as required by paragraphs 2–3 and 6 of FASB ASC 962-205-45, when the plan is using the liquidation basis of accounting in accordance with FASB ASC 205-30?

    (Although the information contained in the following reply is specific to single-employer DC plans, the information may be relevant when considering the termination of a single-employer health and welfare plan or a multiemployer plan that holds fully benefit-responsive investment contracts.)

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    TIS Section 6931.29, "FASB ASC 820 Fair Value Disclosure When an Employee Benefit Plan is Using the Liquidation Basis of Accounting" (Issue Date: September 2014)

    Inquiry — If an employee benefit plan is using the liquidation basis of accounting in accordance with FASB ASC 205-30, do the fair value disclosures required by FASB ASC 820 still apply?

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    TIS Section 6931.30, "Single-Employer DB Plan Disclosures When Using the Liquidation Basis of Accounting" (Issue Date: September 2014)

    Inquiry — When a single-employer DB plan presents its financial statements using the liquidation basis of accounting in accordance with FASB ASC 205-30, what effect would this have on the disclosures the DB plan is required to make by other FASB ASC topics?

    (Although the information contained in the following reply is specific to single-employer DB plans, the information may be relevant when considering the termination of a single-employer DC plan, a health and welfare plan, or a multiemployer plan.)

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    Auditing Questions and Answers

    TIS Section 8900.11, "Management Representations Regarding Prior Periods Presented That Were Audited by Predecessor Auditor" (Issue Date: September 2014)

    Inquiry — Paragraph .20 of AU-C section 580, Written Representations (AICPA, Professional Standards), requires that written representations be obtained for all financial statements and period(s) referred to in the auditor’s report. Paragraph .52 of AU-C section 700, Forming an Opinion and Reporting on Financial Statements (AICPA, Professional Standards), states that “as required by section 580, Written Representations, the auditor should request written representations for all periods referred to in the auditor’s opinion.”

    The prior period financial statements were audited by a predecessor auditor, and the predecessor auditor’s report on the prior period’s financial statements is not reissued. The auditor’s report will express an opinion on the current period’s financial statements and will include an other-matter paragraph in accordance with paragraph .54 of AU-C section 700. Is the auditor required to obtain a representation letter covering the prior period financial statements?

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