Wednesday, January 28, 2009

FAS FSP 132R-1

Plan sponsors will be required to provide more transparency about the assets in their defined benefit pension plans based on FASB’s recently issued FSP FAS 132R-1, "Employers’ Disclosures about Postretirement Benefit Plan Assets."

This new disclosure guidance addresses perceived inadequacies about the types of assets and associated risks in retirement plans. Plan sponsors generally provide info on only four asset categories: equity, debt, real estate, and other investments. The growing popularity of alternative assets and their lack of homogeneity and unique risks make the "other investment" category particularly challenging for financial statement users to evaluate.

The new disclosures are designed to provide additional insight into:

• The major categories of plan assets
• The inputs and valuation techniques used to measure the fair value of plan assets
• The effect of fair value measurements using significant unobservable inputs (Level 3 measurements in FASB Statement 157, Fair Value Measurements) on changes in plan assets for the period
• Significant concentrations of risk within plan assets
• How investment decisions are made, including factors necessary to understanding investment policies and strategies

Required for financial statements with fiscal years ending after December 15, 2009.

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