Financial Reporting Alerts

Issued as needed to highlight up-to-the-minute accounting, regulatory, or other developments that may require immediate action or that may affect financial reporting and disclosure.

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Most Recent Financial Reporting Alert

Employers’ accounting for defined benefit plans — alternatives for applying discount rates to measure benefit cost

Financial Reporting Alert 15-3

The SEC staff recently met with representatives of the Big Four accounting firms and expressed its views on applying an alternative approach for using discount rates to measure the components of net periodic benefit cost for a defined benefit retirement plan obligation (e.g., a pension or other postretirement obligation) under ASC 715. Specifically, the alternative approach focuses on measuring the service cost and interest cost components of net periodic benefit cost by using individual spot rates derived from an acceptable high-quality corporate bond yield curve and matched with separate cash flows for each future year. The SEC staff responded to inquiries from the Big Four firms by stating that it would not object to registrants’ use of such an approach instead of the single weighted-average discount rate approach that is usually employed. The change in approach would not alter the measurement of the related benefit obligation as of the reporting date. The SEC staff also stated that it would not object if a registrant treats the change in approach as a change in accounting estimate. This Financial Reporting Alert provides further background on this topic and describes in greater detail some of the relevant considerations an entity should contemplate in connection with such a change.

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Robert Uhl

Partner | Deloitte & Touche LLP


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