In response to its proposals to put pensions and other post-employment benefits directly on companies´ balance sheets instead of just in footnotes, the Financial Accounting Standards Board (FASB) has received over 200 letters.

Many of these said responses from Fortune 500 and 100 companies have asked the Board to reconsider their proposals for a variety of reasons. Even for those companies that support FASB´s attempt to change the standards on employers´ accounting so that it results in representationally faithful and understandable financial statements (transparent), many have concerns about some of the Board´s proposed changes.

This document will not be an exhaustive study of all the replies but just mention what this reader thinks are some of the most salient points.

1. Year-End Measurement Date - Many companies expressed a concern that it was both operationally prohibitive and didn´t provide any more accuracy. Many thought the current provision of FASB Statements 87 and 106 that permit measurement as of a date that is not more three months earlier than the date of the employer´s year-end financial statements should be retained. At the very least the Board should consider a date of at least one month prior to the date of statement of the financial position.
   
   
2. Effective Date of Proposals - Many feel that the proposed effective date be delayed at least one year, otherwise there will not be enough implementation time between proposed issuance of final guidance on September 30, 2006 and date of recording in a company´s financial statements.
   
   
3. Use of the Projected Benefit Obligation (PBO) - Many feel that balance sheets should reflect liabilities that are currently owed and not using assumed salary increases that have not already been negotiated.
   
   
4. Retroactive Application - Requiring companies to retroactively apply rules for prior years for comparison purposes will cost more in time and effort and serve no real substantial purpose.

I am not quite sure how FASB will react to these letters, but I hope they at least heed the points I have listed above and use a measurement date of at least 30 to 60 if  not 90 days prior to the statement date, use the ABO for liability determination, use an effective date of at least 2007 and do not require retroactive application and force companies to restate prior years´ financial statements.

Whether you agree with the above changes or not, please feel free to comment using the button "Add Comment" on my blog page.