ASC

ASC 325-960

Plan Accounting—Defined Benefit Pension Plans

325 Investments—Other

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In brief

IntermediateSubsequent measurementFair valueDisclosureIndustry-specific

ASC 325-960 (paralleling 960-325) governs how a defined benefit pension plan accounts for and reports its investments and insurance contracts. The core rule is that plan investments—equity and debt securities, real estate, and other assets other than insurance contracts—are presented at fair value at the reporting date, with purchases and sales generally recorded on a trade-date basis; insurance contracts are presented the same way as in the plan's ERISA filing (fair value or contract value). Extensive disclosure is required by general type of investment, including the plan's interest in a master trust.

Key points (7)
  • Purchases and sales of securities are recorded on a trade-date basis, but settlement-date accounting is acceptable when settlement follows the reporting date if fair value did not change significantly from trade date to reporting date and the transactions do not significantly affect the composition of plan assets (325-960-25-1).
  • All plan investments other than insurance contracts are presented at fair value at the reporting date, and a benefit-responsive contract that is not an insurance contract is reported as an investment contract (325-960-35-1).
  • If significant, fair value is reduced by brokerage commissions and other costs normally incurred in a sale (325-960-35-2).
  • Insurance contracts are presented as in the plan's ERISA annual report—either fair value or contract value determined by the insurance entity—and issuer credit quality must be evaluated when contract value is used; non-ERISA plans report as if subject to ERISA (325-960-35-3).
  • A plan whose fiscal year-end is not a month-end may elect to measure investments and investment-related accounts at the nearest month-end, applied consistently, with disclosure of the election, the measurement date, and any contributions, distributions, or significant events between that date and year-end (325-960-35-4; 50-4; 50-5).
  • Investments measured at fair value must be presented by general type (registered investment companies, government securities, common-collective trusts, pooled separate accounts, short-term securities, corporate bonds, common stocks, mortgages, real estate), and Topic 820 class disclosures are given by that general type; plans are exempt from 820-10-50-2B(a) disaggregation (325-960-45-2; 50-1).
  • For master trusts, the plan discloses net appreciation/depreciation in fair value and other investment income, the allocation basis for net assets and investment income, its percentage interest if undivided, master trust investments by general type, and the dollar amount of its interest in each investment type and in the trust's other assets and liabilities (325-960-50-7 through 50-11).

For students. Employee benefit plan reporting is a favorite exam trap because plan investments are carried at fair value rather than under the normal Topic 320 categories, and insurance contracts follow the ERISA filing (possibly contract value) instead. Students often forget that the master trust disclosures require both the trust-level amounts by general type and the plan's own dollar interest in each.

defined benefit pension planplan investments at fair valuetrade-date versus settlement-date accountinginsurance contracts and contract valuebenefit-responsive investment contractmaster trust interestnet asset value practical expedientgeneral type of investment disclosure

Machine-generated study aid for ASC 325-960. Check the source paragraphs below.

325-960-00Status

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325-960-00-1
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
Benefits Amended Accounting Standards Update No. 2016-19 12/14/2016
Benefits (1st def.) Superseded Accounting Standards Update No. 2014-06 03/14/2014
Benefits (3rd def.) Added Accounting Standards Update No. 2014-06 03/14/2014
Contract Value Amended Accounting Standards Update No. 2014-06 03/14/2014
Defined Benefit Plan Added Accounting Standards Update No. 2014-06 03/14/2014
Defined Benefit Pension Plan (1st def.) Superseded Accounting Standards Update No. 2014-06 03/14/2014
Unallocated Contract (1st def.) Superseded Accounting Standards Update No. 2014-06 03/14/2014
Unallocated Contract (2nd def.) Added Accounting Standards Update No. 2014-06 03/14/2014
960-325-05-1 Amended Accounting Standards Update No. 2014-06 03/14/2014
960-325-25-1 Amended Accounting Standards Update No. 2014-06 03/14/2014
960-325-35-4 Added Accounting Standards Update No. 2015-12 (Part III) 07/31/2015
960-325-45-1 Amended Accounting Standards Update No. 2015-12 (Part II) 07/31/2015
960-325-45-2 Added Accounting Standards Update No. 2015-12 (Part II) 07/31/2015
960-325-50-1 Amended Accounting Standards Update No. 2015-12 (Part II) 07/31/2015
960-325-50-1 Amended Accounting Standards Update No. 2012-04 10/01/2012
960-325-50-2 Superseded Accounting Standards Update No. 2015-12 (Part II) 07/31/2015
960-325-50-4 Added Accounting Standards Update No. 2015-12 (Part III) 07/31/2015
960-325-50-5 Added Accounting Standards Update No. 2015-12 (Part III) 07/31/2015
960-325-50-6 Added Accounting Standards Update No. 2015-12 (Part II) 07/31/2015
960-325-50-7 through 50-11
 Added Accounting Standards Update No. 2017-06 02/27/2017

325-960-05Overview and Background

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325-960-05-1
This Subtopic provides guidance on investments and insurance contracts for defined benefit pension plans.

325-960-15Scope and Scope Exceptions

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Overall Guidance

325-960-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 960-10-15.

325-960-25Recognition

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325-960-25-1
The accrual basis requires that purchases (and sales) of securities be recorded on a trade-date basis. However, if the settlement date is after the reporting date, accounting on a settlement-date basis is acceptable if both of the following conditions exist:
  1. a
    The fair value of securities purchased (or sold) just before the reporting date does not change significantly from the trade date to the reporting date.
  2. b
    The purchases (or sales) do not significantly affect the composition of the plan's assets available for benefits.

325-960-35Subsequent Measurement

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325-960-35-1
Plan investments—whether equity or debt securities, real estate, or other types (excluding insurance contracts)—shall be presented at their fair value at the reporting date. A contract with benefit-responsive provisions shall be reported as an investment contract if it cannot otherwise be considered an insurance contract (see paragraph 960-325-35-3).
325-960-35-2
If significant, the fair value of an investment shall be reduced by brokerage commissions and other costs normally incurred in a sale (similar to fair value less cost to sell).
325-960-35-3
Insurance contracts shall be presented in the same manner as specified in the annual report filed by the plan with certain governmental agencies pursuant to the Employee Retirement Income Security Act; that is, either at fair value or at amounts determined by the insurance entity (contract value). The credit quality of the issuer also must be evaluated when using contract value to report an investment contract with significant insurance risk. A plan not subject to the Employee Retirement Income Security Act shall present its insurance contracts as if the plan were subject to the reporting requirements of that Act.
325-960-35-4
If a plan's fiscal year-end does not coincide with a month-end, the plan may measure investments and investment-related accounts (for example, a liability for a pending trade with a broker) using the month-end that is closest to the plan's fiscal year-end. That election shall be applied consistently from year to year.

325-960-40Derecognition

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325-960-40-1
See Section 960-325-25 for guidance on the use of the trade-date basis in recording sales of securities.

325-960-45Other Presentation Matters

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325-960-45-1
Information regarding a plan's investments that are measured using fair value shall indicate whether reported fair values have been measured by quoted prices in an active market or are fair values otherwise determined.
325-960-45-2
Investments measured using fair value in the statement of net assets available for benefits or in the notes shall be presented by general type, such as the following:
  1. a
    Registered investment companies (for example, mutual funds)
  2. b
    Government securities
  3. c
    Common-collective trusts
  4. d
    Pooled separate accounts
  5. e
    Short-term securities
  6. f
    Corporate bonds
  7. g
    Common stocks
  8. h
    Mortgages
  9. i
    Real estate.

325-960-50Disclosure

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325-960-50-1
Disclosure of the plan's accounting policies shall include a description of valuation techniques and inputs used to measure the fair value of investments (as required by Section 820-10-50) and a description of the methods and significant assumptions used to measure the reported value of contracts with insurance entities. However, defined benefit pension plans are exempt from the requirements in paragraph 820-10-50-2B(a) to disaggregate assets by nature, characteristics, and risks. The disclosures of information by classes of assets required by Section 820-10-50 shall be provided by general type of plan assets consistent with paragraph 960-325-45-2.
325-960-50-3
The historical cost of plan investments presented at fair value is neither required nor proscribed.
325-960-50-4
If applicable, a plan shall disclose the accounting policy election to measure investments and investment-related accounts using the month-end that is closest to the plan's fiscal year-end in accordance with paragraph 960-325-35-4 and the month-end measurement date.
325-960-50-5
If a plan measures investments and investment-related accounts in accordance with paragraph 960-325-35-4 and contributions, distributions, and/or significant events (such as a plan amendment, a merger, or a termination) occur between the month-end date used to measure investments and investment-related accounts and the plan's fiscal year-end, the plan shall disclose the amounts of those contributions, distributions, and/or significant events.

Investments Measured Using the Net Asset Value per Share Practical Expedient

325-960-50-6
If an investment is measured using the net asset value per share (or its equivalent) practical expedient in paragraph 820-10-35-59 and that investment is in a fund that files U.S. Department of Labor Form 5500 as a direct filing entity, disclosure of that investment's significant investment strategy, as discussed in paragraph 820-10-50-6A(a), is not required.

Interests in Master Trusts

325-960-50-7
A plan shall disclose the following in the notes to financial statements for each period for which a statement of changes in net assets available for benefits is presented:
  1. a
    Net appreciation or depreciation in the fair value of investments of the master trust. 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 (a)).
325-960-50-8
A plan also shall include in the notes to financial statements both of the following:
  1. a
    Description of the basis used to allocate both of the following:
    1. 1
      Net assets
    2. 2
      Total investment income. See paragraph 960-325-50-7 for the components of total investment income.
  2. b
    For a plan with an undivided interest in the master trust (that is, when the plan has a proportionate, rather than a specific, interest in the master trust), its percentage interest in the master trust as of the date of each statement of net assets available for benefits presented.
325-960-50-9
In the notes to financial statements a plan shall include the investments of a master trust measured using fair value presented by general type of investment, such as the following, as of the date of each statement of net assets available for benefits presented:
  1. a
    Registered investment companies (for example, mutual funds)
  2. b
    Government securities
  3. c
    Common-collective trusts
  4. d
    Pooled separate accounts
  5. e
    Short-term securities
  6. f
    Corporate bonds
  7. g
    Common stocks
  8. h
    Mortgages
  9. i
    Real estate.
325-960-50-10
A plan shall disclose the dollar amount of its interest in each general type of investment held by the master trust, consistent with the disclosure required by paragraph 960-325-50-9. See paragraph 962-325-55-18 for an example of this disclosure.
325-960-50-11
A plan also shall disclose the master trust's other assets and liabilities and the dollar amount of the plan's interest in each of those other assets and liabilities. Examples of those balances include the following:
  1. a
    Amounts due from brokers for securities sold
  2. b
    Amounts due to brokers for securities purchased
  3. c
    Receivables relating to derivatives
  4. d
    Payables relating to derivatives
  5. e
    Accrued interest and dividends
  6. f
    Accrued expenses.
See paragraph 962-325-55-18 for an example of this disclosure.

325-960-60Relationships

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Derivatives and Hedging

325-960-60-1
For reporting of gains or losses on hedging instruments and nonhedging derivative instruments, see Section 815-10-35.
325-960-60-2
For accounting for nonleveraged inflation-indexed contracts for pension obligations, see paragraph 815-15-25-50.

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