The American Institute of CPAs’ (AICPA) Employee Benefit Plans Expert Panel and the AICPA Employee Benefit Plan Audit Quality Center Executive Committee have been engaged in efforts during the past year to raise awareness among Financial Accounting Standards Board (FASB) members and staff about the uniqueness of employee benefit plan financial statements, including their purpose, users and preparers.
The chairs of the Expert Panel and the Executive Committee have met with FASB representatives to discuss the specialized nature of employee benefit plans and how FASB can best incorporate the consideration of employee benefit plans into its standard-setting process. As a result of this meeting, the Expert Panel and Executive Committee presented an educational session to FASB staff to help them better understand the nature of plans, the purpose and users of plan financial statements, and some of the related reporting challenges under existing GAAP.
In addition, the Expert Panel recently provided the FASB with a 26-page discussion memorandum that identifies areas in current accounting affecting employee benefit plans that are conflicting, redundant, irrelevant, or incomplete due to the specialized characteristics of plans. The discussion memorandum is intended to provide observations about difficulties encountered in practice with current plan accounting and does not suggest possible resolutions. The memorandum groups the issues into two categories (A and B) based on relevance, “operationality,” and prevalence.
Category A includes areas in current accounting affecting most employee benefit plans that are conflicting, redundant, irrelevant, or incomplete due to the specialized characteristics of plans. These areas are considered to be pressing topics that apply to most plans, and standard-setter action is requested.
Category B includes areas in accounting that are difficult to apply in practice due to the specialized characteristics of plans. These areas are considered to be important topics that apply to certain types of employee benefit plans (e.g., defined benefit pension plans, health and welfare plans, and employee stock ownership plans), and may need further standard-setter action.
Additionally, the discussion memorandum highlights those areas in accounting that were previously tailored to the unique nature of plans and have been subsequently overridden by more recent standards, and explores the need for plans to be considered their own class of entity due to the specialized characteristics of plans and the differential factors that highlight how plans differ from both private companies and public companies. Click here to read the entire discussion memorandum.