ASC

ASC 205-962

Plan Accounting—Defined Contribution Pension Plans

205 Presentation of Financial Statements

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In brief

IntermediatePresentationDisclosureCompensation and benefitsFinancial statement presentation

This subtopic governs how a defined contribution pension plan presents its GAAP financial statements. On the accrual basis, the plan must present a statement of net assets available for benefits at plan year-end and a statement of changes in net assets available for benefits for the year, showing total assets, total liabilities, and net assets available for benefits, plus specified minimum categories of changes (net appreciation/depreciation in fair value, investment income, employer/participant/other contributions, benefits paid, insurance contract purchases, and administrative expenses). It also lists required note disclosures about the plan agreement, amendments, contribution basis, tax status, forfeitures, and similar matters.

Key points (7)
  • Defined contribution plan financial statements must be prepared on the accrual basis and consist of a statement of net assets available for benefits as of plan year-end and a statement of changes in net assets available for benefits for the year then ended (205-962-45-1).
  • The statement of net assets available for benefits presents total assets, total liabilities, and net assets available for benefits (205-962-45-2); non-benefit liabilities such as securities purchased, refunds of excess contributions, income taxes, and third-party administrator fees are accrued and deducted (205-962-45-4).
  • The statement of changes reflects income credited to participants and net appreciation or depreciation in fair value of only those investment contracts that are not deemed fully benefit-responsive (205-962-45-6); see 962-325-35-5 for fully benefit-responsive contracts.
  • Minimum line items in the statement of changes include net appreciation/depreciation in fair value (realized and unrealized), investment income, employer contributions split between cash and noncash (noncash at fair value), participant contributions, contributions from other sources, benefits paid, payments to insurance entities for excluded contracts, and administrative expenses (205-962-45-7).
  • Other significant changes, such as transfers of assets to or from other plans or demutualization proceeds, are presented separately (205-962-45-8).
  • A statement of cash flows is not required (per 230-10-15-4) but is encouraged when it would show the plan's ability to meet future obligations, such as when investments are not highly liquid (205-962-45-9).
  • An interest in a master trust and the change in that interest must be separate line items in each statement (205-962-45-10), and notes must disclose the plan description, amendments, unallocated assets, contribution basis and ERISA minimum funding compliance, absorbed administrative costs, insurance contract policy, tax status, guarantees, amounts allocated to withdrawing participants (not reported as a liability), and forfeited nonvested accounts and their disposition (205-962-50-1).

For students. Exam questions often test that a defined contribution plan needs only two statements (net assets available for benefits and changes therein) and no statement of cash flows, unlike a business enterprise. A common misunderstanding: amounts allocated to participants who have elected to withdraw but have not yet been paid are NOT reported as a liability under GAAP (205-962-50-1(i)), even though Form 5500 reconciliation may be needed.

net assets available for benefitsstatement of changes in net assets available for benefitsaccrual basisfully benefit-responsive investment contractmaster trust interestforfeited nonvested accountsemployee benefit plan financial statementserisa minimum funding requirements

Machine-generated study aid for ASC 205-962. Check the source paragraphs below.

205-962-00Status

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205-962-05Overview and Background

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205-962-05-1
This Subtopic provides guidance on the presentation of financial statements of defined contribution pension plans.

205-962-15Scope and Scope Exceptions

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Overall Guidance

205-962-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 962-10-15.

205-962-45Other Presentation Matters

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205-962-45-1
The financial statements of a defined contribution plan prepared in accordance with generally accepted accounting principles (GAAP) shall be prepared on the accrual basis of accounting and include both of the following:
  1. a
    A statement of net assets available for benefits of the plan as of the end of the plan year
  2. b
    A statement of changes in net assets available for benefits of the plan for the year then ended.

Net Assets Available for Benefits

205-962-45-2
The statement of net assets available for benefits of the plan shall present amounts for all of the following:
  1. a
    Total assets
  2. b
    Total liabilities
  3. c
    Subparagraph superseded by Accounting Standards Update No. 2015-12. (Part I).
  4. d
    Net assets available for benefits.

Other Components of Net Assets Available for Benefits

205-962-45-4
A plan may have liabilities (other than for benefits) that shall be accrued. Such liabilities may be for amounts owed for securities purchased, refund of excess contributions, income taxes payable by the plan, or other expenses (for example, third-party administrator fees). These liabilities shall be deducted to arrive at net assets available for benefits.

Changes in Net Assets Available for Benefits

205-962-45-6
The statement of changes in net assets available for benefits shall be prepared on a basis that reflects income credited to participants in the plan and net appreciation or depreciation in the fair value of only those investment contracts that are not deemed to be fully benefit-responsive. Paragraph 962-325-35-5 provides guidance on the accounting for fully benefit-responsive investment contracts.
205-962-45-7
Information about changes in net assets available for benefits is intended to present the effects of significant changes in net assets during the year and shall present, at a minimum, all of the following:
  1. a
    The net appreciation or depreciation in fair value. Net appreciation or depreciation includes realized gains and losses on investments that were both purchased and sold during the period as well as unrealized appreciation or depreciation of the investments held at year end.
  2. b
    Investment income, exclusive of changes in fair value described in (a).
  3. c
    Contributions from employers, segregated between cash and noncash contributions (a noncash contribution shall be recorded at fair value; the nature of noncash contributions shall be described either parenthetically or in a note).
  4. d
    Contributions from participants, including those transmitted by the sponsor.
  5. e
    Contributions from other identified sources (for example, state subsidies or federal grants).
  6. f
    Benefits paid to participants.
  7. g
    Payments to insurance entities to purchase contracts that are excluded from plan assets.
  8. h
    Administrative expenses.
205-962-45-8
The list of minimum disclosures is not intended to limit the amount of detail or the manner of presenting the information, and subclassifications or additional classifications may be useful. Other changes in net assets available for benefits (for example, transfers of assets to or from other plans or proceeds from demutualization) shall be presented separately in the financial statements if they are significant.

Statement of Cash Flows

205-962-45-9
Paragraph 230-10-15-4 states that a statement of cash flows is not required to be provided by a defined benefit pension plan that presents financial information in accordance with this Subtopic. That paragraph also states that other employee benefit plans that present financial information similar to that required by Topic 960 (including the presentation of plan investments at fair value) are not required to provide a statement of cash flows. That paragraph also states that employee benefit plans are encouraged to include a statement of cash flows with their annual financial statements if that statement would provide relevant information about the ability of the plan to meet future obligations (for example, if the plan invests in assets that are not highly liquid or obtains financing for investments).

Interests in Master Trusts

205-962-45-10
For each master trust in which a plan holds an interest, a plan shall present that interest and the change in that interest in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. See Section 962-325-50 for master trust disclosures.

205-962-50Disclosure

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205-962-50-1
The financial statements shall disclose, if applicable, all of the following:
  1. a
    A brief, general description of the plan agreement including, but not limited to, vesting and allocation provisions and the disposition of forfeitures. If a plan agreement or a description providing this information is otherwise published and made available, this description may be omitted from the financial statements provided that reference to the other source is made.
  2. b
    A description of significant plan amendments adopted during the period, and the effects of such amendments on net assets if significant either individually or in the aggregate.
  3. c
    The amount of unallocated assets, as well as the basis used to allocate asset values to participants' accounts if that basis differs from the one used to record assets in the financial statements.
  4. d
    The basis for determining contributions by employers and, for a contributory plan, the method of determining participants' contributions. Plans subject to the minimum funding requirements of the Employee Retirement Income Security Act, such as money purchase pension plans, shall disclose whether those requirements have been met. If a minimum funding waiver has been granted by the Internal Revenue Service (IRS), or if a request for waiver is pending before the IRS, that fact shall be disclosed.
  5. e
    If significant costs of plan administration are being absorbed by the employers, that fact shall be disclosed in the notes to financial statements.
  6. f
    The policy regarding the purchase of contracts with insurance entities that are excluded from plan assets.
  7. g
    The federal income tax status of the plan if a favorable determination letter has not been obtained or maintained. Note that reports filed in accordance with the requirements of the Employee Retirement Income Security Act must include disclosure of information concerning whether a tax ruling or determination letter has been obtained, which is more than is required by Topic 960.
  8. h
    Guarantees by others of debt of the plan.
  9. i
    Amounts allocated to accounts of persons who have elected to withdraw from the plan but have not yet been paid. These amounts shall not be reported as a liability on the statement of net assets available for benefits in financial statements prepared in conformity with generally accepted accounting principles (GAAP). A note to financial statements to reconcile the audited financial statements to Form 5500 may be necessary to comply with the Employee Retirement Income Security Act.
  10. j
    The amount and disposition of forfeited nonvested accounts. Specifically, identification of those amounts that are used to reduce future employer contributions, expenses, or reallocated to participant's accounts, in accordance with plan documents.

205-962-S00StatusSEC

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205-962-S00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
962-205-S99-1AmendedAccounting Standards Update No. 2019-0707/26/2019

205-962-S15Scope and Scope ExceptionsSEC

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Entities

205-962-S15-1
See paragraph 962-205-S99-1, Regulation S-X Rule 6A-01, for entities to which Rules 6A-01 through 6A-05 apply.

205-962-S45Other Presentation MattersSEC

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Format

205-962-S45-1
See paragraph 962-205-S99-1, Regulation S-X Rule 6A-03, for presentation requirements for statements of financial condition.
205-962-S45-2
See paragraph 962-205-S99-1, Regulation S-X Rule 6A-04, for presentation requirements for statements of income and changes in plan equity.

205-962-S50DisclosureSEC

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Valuation of Assets

205-962-S50-1
See paragraph 962-205-S99-1, Regulation S-X Rule 6A-02, for disclosure requirements for employee stock purchase, savings, and other plans within the scope of Rule 6A-01.

Schedules

205-962-S50-2
See paragraph 962-205-S99-1, Regulation S-X Rule 6A-05, for schedules required to be filed for entities within the scope of Rule 6A-01.

205-962-S99SEC MaterialsSEC

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SEC Rules, Regulations, and Interpretations

205-962-S99-1
The following is the text of Regulation S-X Rule 6A, Employee Stock Purchase, Savings and Similar Plans (17 CFR 210.6A-01 through 17 CFR 210.6A-05).
  • Rule 6A-01. Application of Rules 6A-01 to 6A-05 (17 CFR 210.6A-01).
    • Application of §§ 210.6A-01 to 210.6A-05
    • (a) Sections 210.6A-01 to 210.6A-05 shall be applicable to financial statements filed for employee stock purchase, savings and similar plans.
    • (b) [Reserved]
[47 FR 56843, Dec. 21, 1982]
  • Rule 6A-02. Special Rules Applicable to Employee Stock Purchase, Savings and Similar Plans (17 CFR 210.6A-02).
      • The financial statements filed for persons to which this article is applicable shall be prepared in accordance with the following special rules in addition to the general rules in §§ 210.1-01 to 210.4-10. Where the requirements of a special rule differ from those prescribed in a general rule, the requirements of the special rule shall be met.
    • (a) Investment programs.
      • If the participating employees have an option as to the manner in which their deposits and contributions may be invested, a description of each investment program shall be given in a footnote or otherwise. The number of employees under each investment program shall be stated.
    • (b) Net asset value per unit.
      • Where appropriate, the number of units and the net asset value per unit shall be given by footnote or otherwise.
    • (c) Federal income taxes.
      • (1) If the plan is not subject to Federal income taxes, a note shall so state indicating briefly the principal assumptions on which the plan relied in not making provision for such taxes.
      • (2) State the Federal income tax status of the employee with respect to the plan.
    • (d) Valuation of assets.
      • The statement of financial condition shall reflect all investments at value, showing cost parenthetically. For purposes of this rule, the term value shall mean (1) market value for those securities having readily available market quotations and (2) fair value as determined in good faith by the trustee(s) for the plan (or by the person or persons who exercise similar responsibilities) with respect to other securities and assets.
[47 FR 56843, Dec. 21, 1982]
  • Rule 6A-03. Statements of Financial Condition (17 CFR 210.6A-03).
    • Statements of financial condition filed under this rule shall comply with the following provisions:
    • PLAN ASSETS
    • 1. Investments in securities of participating employers. State separately each class of securities of the participating employer or employers.
    • 2. Investments in securities of unaffiliated issuers.
      • (a) United States Government bonds and other obligations. Include only direct obligations of the United States Government.
      • (b) Other securities. State separately (1) marketable securities and (2) other securities.
    • 3. Investments. Other than securities. State separately each major class.
    • 4. Dividends and interest receivable.
    • 5. Cash.
    • 6. Other assets. State separately (a) total of amounts due from participating employers or any of their directors, officers and principal holders of equity securities; (b) total of amounts due from trustees or managers of the plan; and (c) any other significant amounts.
    • LIABILITIES AND PLAN EQUITY
    • 7. Liabilities. State separately (a) total of amounts payable to participating employers; (b) total of amounts payable to participating employees; and (c) any other significant amounts.
    • 8. Reserves and other credits. State separately each significant item and describe each such item by using an appropriate caption or by a footnote referred to in the caption.
    • 9. Plan equity at close of period.
[27 FR 78710, Aug. 9, 1962. Redesignated at 47 FR 56843, Dec. 21, 1982]
  • Rule 6A-04. Statements of Comprehensive Income and Changes in Plan Equity (17 CFR 210.6A-04).
    • Statements of comprehensive income and changes in plan equity filed under this rule shall comply with the following provisions:
    • 1. Net investment income.
      • (a) Income. State separately income from (1) cash dividends, (2) interest, and (3) other sources. Income from investments in or indebtedness of participating employers shall be segregated under the appropriate subcaption.
      • (b) Expenses. State separately any significant amounts.
      • (c) Net investment income.
    • 2. Realized gain or loss on investments.
      • (a) State separately the net of gains or losses arising from transactions in (1) investments in securities of the participating employer or employers; (2) other investments in securities; and (3) other investments.
      • (b) State in a footnote or otherwise for each category of investment in paragraph (a) above the aggregate cost, the aggregate proceeds and the net gain or loss. State the principle followed in determining the cost of securities sold, e.g., average cost or first-in, first-out.
    • 3. Unrealized appreciation or depreciation of investments.
      • (a) State the amount of increase or decrease in unrealized appreciation or depreciation of investments during the period.
      • (b) State in a footnote or otherwise the amount of unrealized appreciation or depreciation of investments at the beginning of the period of report, at the end of the period of report, and the increase or decrease during the period.
    • 4. Contributions and deposits.
      • (a) State separately (1) total of amounts deposited by participating employees, and (2) total of amounts contributed by the participating employer or employers.
      • (b) If employees of more than one employer participate in the plan, state in tabular form in a footnote or otherwise the amount contributed by each employer and the deposits of the employees of each such employer.
    • 5. Withdrawals, lapses and forfeitures. State separately (a) balances of employees' accounts withdrawn, lapsed or forfeited during the period; (b) amounts disbursed in settlement of such accounts; and (c) disposition of balances remaining after settlement specified in (b).
    • 6. Plan equity at beginning of period.
    • 7. Plan equity at end of period.
[27 FR 7870, Aug. 9, 1962. Redesignated at 47 FR 56843, Dec. 21, 1982; 83 FR 50203, Oct. 4, 2018]
  • Rule 6A-05. What Schedules Are to be Filed (17 CFR 210.6A-05).
    • (a) Schedule I of this section shall be filed as of the most recent audited statement of financial condition and any subsequent unaudited statement of financial condition being filed. Schedule II of this section shall be filed as of the date of each statement of financial condition being filed. Schedule III of this section shall be filed for each period for which a statement of comprehensive income and changes in plan equity is filed. All schedules shall be audited if the related statements are audited.
      • Schedule I—Investments. A schedule substantially in form prescribed by § 210.12-12 shall be filed in support of captions 1, 2 and 3 of each statement of financial condition unless substantially all of the information is given in the statement of financial condition by footnote or otherwise.
      • Schedule II—Allocation of plan assets and liabilities to investment program. If the plan provides for separate investment programs with separate funds, and if the allocation of assets and liabilities to the several funds is not shown in the statement of financial condition in columnar form or by the submission of separate statements for each fund, a schedule shall be submitted showing the allocation of each caption of each statement of financial condition filed to the applicable fund.
      • Schedule III—Allocation of plan income and changes in plan equity to investment programs. If the plan provides for separate investment programs with separate funds, and if the allocation of income and changes in plan equity to the several funds is not shown in the statement of comprehensive income and changes in plan equity in columnar form or by the submission of separate statements for each fund, a schedule shall be submitted showing the allocation of each caption of each statement of comprehensive income and changes in plan equity filed to the applicable fund.
    • (b) [Reserved]
[45 FR 63676, Sept. 25, 1980. Redesignated at 47 FR 56843, Dec. 21, 1982, and amended at 50 FR 25215, June 18, 1985; 83 FR 50203, Oct. 4, 2018]

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