ASC

ASC 360-960

Plan Accounting—Defined Benefit Pension Plans

360 Property, Plant, and Equipment

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In brief

IntermediateSubsequent measurementInventory and PP&ECompensation and benefitsPresentation

This Subtopic governs how a defined benefit pension plan accounts for property, plant, and equipment it uses in operating the plan (buildings, equipment, furniture and fixtures, leasehold improvements). Unlike plan investments, which are generally reported at fair value, these operating assets are presented at cost less accumulated depreciation or amortization (360-960-35-1). The rationale is that expenditures for operating assets are advance payments for future administrative services rather than investments expected to generate cash flows to pay benefits (360-960-35-2).

Key points (5)
  • The Subtopic provides guidance on accounting for property, plant, and equipment of defined benefit pension plans (360-960-05-1).
  • Scope follows the Overall Subtopic scope in Section 960-10-15 (360-960-15-1).
  • Plan assets used in plan operations are presented at cost less accumulated depreciation or amortization (360-960-35-1).
  • Operating assets may include buildings, equipment, furniture and fixtures, and leasehold improvements (360-960-35-1).
  • Expenditures for operating assets are in the nature of advance payments for future administrative services, distinguishing them from investments expected to generate future cash flows used to provide benefits (360-960-35-2).

For students. The common misunderstanding is assuming everything a pension plan holds is carried at fair value; assets the plan actually uses to run itself (its office building, furniture, leasehold improvements) stay at historical cost less depreciation because they are prepaid administrative services, not benefit-generating investments.

defined benefit pension planoperating assetscost less accumulated depreciationplan investments at fair valueleasehold improvementsadministrative servicesplan financial statements

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360-960-00Status

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360-960-00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
BenefitsAmendedAccounting Standards Update No. 2016-1912/14/2016
Benefits (1st def.)SupersededAccounting Standards Update No. 2014-0603/14/2014
Benefits (3rd def.)AddedAccounting Standards Update No. 2014-0603/14/2014
Defined Benefit PlanAddedAccounting Standards Update No. 2014-0603/14/2014
Defined Benefit Pension Plan (1st def.)SupersededAccounting Standards Update No. 2014-0603/14/2014
960-360-05-1AmendedAccounting Standards Update No. 2014-0603/14/2014
960-360-35-2AmendedAccounting Standards Update No. 2014-0603/14/2014

360-960-05Overview and Background

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360-960-05-1
This Subtopic provides guidance on accounting for property, plant, and equipment for defined benefit pension plans.

360-960-15Scope and Scope Exceptions

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Overall Guidance

360-960-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 960-10-15.

360-960-35Subsequent Measurement

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360-960-35-1
Plan assets used in plan operations shall be presented at cost less accumulated depreciation or amortization and may consist of, among others, any of the following:
  1. a
    Buildings
  2. b
    Equipment
  3. c
    Furniture and fixtures
  4. d
    Leasehold improvements.
360-960-35-2
Expenditures for operating assets are in the nature of advance payments for future administrative services. In that respect they differ from investments that are expected to generate future cash flows that will be used to provide benefits.

Related subtopics