Financial Accounting Standards Board (FASB) Accounting Standards Codification™ (ASC) 960, Plan Accounting-Defined Benefit Pension Plans, establishes generally accepted accounting principles for defined benefit pension plans and prescribes the general form and content of financial statements of those plans.
The primary objective of a plan's financial statements is to provide information that is useful in assessing the plan's present and future ability to pay benefits when they are due. This objective requires the presentation of information about the plan's economic resources and a measure of participants' accumulated benefits.
Defined benefit pension plan financial statements intended to be presented in accordance with generally accepted accounting principles should be prepared on the accrual basis and should include the following:
- A statement of the net assets available for benefits as of the end of the plan year (ERISA requires that this statement be presented in comparative form)
- A statement of changes in net assets available for benefits for the year then ended
- Information regarding the actuarial present value of accumulated plan benefits
- Information regarding the effects, if significant, of certain factors affecting the year-to-year change in accumulated plan benefits
FASB ASC 230-10-15-4 excludes defined benefit pension plans that present information in accordance with the provisions of FASB ASC 960 from the requirement to present a statement of cash flows.
Plans should consider providing a statement of cash flows when that statement would provide relevant information about the ability of the plan to pay benefits. For example, the plan invests in assets that are not highly liquid or obtains financing for investments.
Accumulated plan benefits are to be presented as the present value of future benefits attributable, under the plan's provisions, to service rendered to the date of the actuarial valuation. The accumulated benefit information may be presented as of the beginning or the end of the plan year under FASB ASC 960; however, an end-of-year benefit information date is considered preferable. If the information is as of the beginning of the year, prior-year statements of net assets and changes therein are also required; otherwise, comparative statements are not required.