ASC

ASC 715-10

Overall

715 Compensation—Retirement Benefits

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In brief

IntroductoryCompensation and benefitsRecognitionSubsequent measurementDisclosure

ASC 715-10 is the Overall subtopic that sets the objectives and pervasive scope for employer accounting for pension, other postretirement, and certain special or contractual termination benefits. Its core premise is that a benefit plan is an exchange of deferred compensation for employee service, so the employer's obligation is incurred as services are rendered and cost is recognized over the employee service periods. Because the original content was built on an expense recognition model, most operative guidance sits in the Subsequent Measurement Sections of Subtopics 715-20, 715-30, 715-60, 715-70, and 715-80.

Key points (7)
  • A benefit plan is an exchange between employer and employee: retirement benefits are deferred compensation, not gratuities, and the obligation is incurred when services are rendered (715-10-05-6).
  • Objectives are to recognize net periodic pension cost and net periodic other postretirement benefit cost as employees render service, to reflect the obligation on the balance sheet based on the mutual understanding of plan terms, to disclose relevant information, and to require uniform measurement methods for similar plans (715-10-10-1).
  • The Topic applies to all employers, including NFPs (which also apply Subtopic 958-715), whether or not the obligation is funded (715-10-15-2).
  • Scope covers any arrangement in substance a pension or other postretirement plan regardless of form or funding, unwritten plans discernible from a practice of paying benefits or oral representations, deferred compensation contracts that taken together are equivalent to such a plan, and health and welfare benefits for employees on disability retirement (715-10-15-3).
  • Scope also covers settlements of all or part of the obligation, plan curtailments, and pension/OPEB provided as special or contractual termination benefits not addressed elsewhere (715-10-15-4).
  • Excluded are individually negotiated contracts with selected employees, which are accounted for individually under Topic 710, and postemployment benefits paid before retirement (e.g., layoff benefits) unless payable from a pension or OPEB plan, which fall under Topic 712 (715-10-15-5).
  • There are no special provisions for non-U.S. plans; applicability turns on the nature of the obligation and the terms defining benefits, not on funding, payment form, or whether benefits are required by law or custom (715-10-15-6 through 15-7); the Topic does not change Topic 960 plan-level reporting (715-10-15-8).

For students. This is the gateway subtopic: it tells you which Subtopic to use (defined benefit pension, OPEB, defined contribution, multiemployer) and, importantly, that substance over form governs scope—an unwritten practice of paying retirement benefits is a plan. A common misunderstanding is assuming unfunded or foreign arrangements escape ASC 715, or that pre-retirement severance benefits belong here rather than in Topic 712.

deferred compensation exchangenet periodic pension costnet periodic other postretirement benefit costbenefit plan scopeunwritten plansettlement and curtailmentexpense recognition modelfunded status

Machine-generated study aid for ASC 715-10. Check the source paragraphs below.

715-10-00Status

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715-10-00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
715-10-05-2AmendedAccounting Standards Update No. 2017-0703/10/2017
715-10-05-4SupersededAccounting Standards Update No. 2017-0703/10/2017
715-10-05-8SupersededAccounting Standards Update No. 2017-0703/10/2017
715-10-05-10SupersededAccounting Standards Update No. 2017-0703/10/2017
715-10-15-8AmendedAccounting Standards Update No. 2009-0207/01/2009
715-10-65-1AddedAccounting Standards Update No. 2015-0404/15/2015

715-10-05Overview and Background

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715-10-05-1
The Compensation—Retirement Benefits Topic establishes standards of financial accounting and reporting for an employer that offers pension, other postretirement, and certain special or contractual termination benefits to its employees.
715-10-05-2
This Topic contains the following Subtopics:
  1. a
    Overall (Subtopic 715-10)
  2. b
    Defined Benefit Plans—General (Subtopic 715-20)
  3. c
    Defined Benefit Plans—Pension (Subtopic 715-30)
  4. cc
    Defined Benefit Plans—Other Postretirement (Subtopic 715-60) 
  5. d
    Defined Contribution Plans (Subtopic 715-70) 
  6. e
    Multiemployer Plans (Subtopic 715-80) 
  7. f
    Subparagraph superseded by Accounting Standards Update No. 2017-07.
715-10-05-3
Throughout the Codification, content is structured and authored using an asset and liability model as its underlying premise. However, the original content used to populate this Topic was based on an expense recognition model rather than an asset and liability model. Because the expense recognition model focuses primarily on remeasurement, the majority of the guidance throughout this Topic is contained in the Subsequent Measurement Sections of the applicable Subtopics.
715-10-05-6
The guidance in this Topic is derived from the basic idea that a benefit plan is an exchange between the employer and the employee. In exchange for services provided by the employee, the employer promises to provide, in addition to current wages and other benefits, an amount of retirement income or benefit. It follows from that basic view that benefits are not gratuities but instead are part of an employee's compensation, and because payment is deferred, the benefit plan is a type of deferred compensation. It also follows that the employer's obligation for that compensation is incurred when the services are rendered.
715-10-05-7
A benefit plan is an arrangement that is mutually understood by an employer and its employees, whereby an employer undertakes to provide its current and former employees with benefits after they retire in exchange for the employees' services over a specified period of time, upon attaining a specified age while in service, or both. Benefits may commence immediately upon termination of service or may be deferred until retired employees attain a specified age.
715-10-05-9
Because the obligation to provide benefits arises as employees render the services necessary to earn the benefits pursuant to the terms of the plan, this Topic provides guidance regarding when the cost of providing the benefits should be recognized over those employee service periods.

715-10-10Objectives

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715-10-10-1
The objectives of this Topic are as follows:
  1. a
    To enhance the relevance and representational faithfulness of the employer's reported results of operations by recognizing net periodic pension cost and net periodic other postretirement benefit cost as employees render the services necessary to earn their pension and other postretirement benefits
  2. b
    To enhance the relevance and representational faithfulness of the employer's statement of financial position by including a measure of the obligation to provide pension and other postretirement benefits based on a mutual understanding between the employer and its employees of the terms of the underlying plan
  3. c
    To enhance the ability of users of the employer's financial statements to understand the extent and effects of the employer's undertaking to provide pension and other postretirement benefits to its employees by disclosing relevant information about the obligation and cost of the pension and other postretirement benefit plans and how those amounts are measured
  4. d
    To improve the understandability and comparability of amounts reported by requiring employers with similar plans to use the same method to measure their pension and other postretirement benefit obligations and the related costs of the postretirement benefits.

715-10-15Scope and Scope Exceptions

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Overall Guidance

715-10-15-1
The Scope Section of the Overall Subtopic establishes the pervasive scope for all Subtopics of the Compensation—Retirement Benefits Topic. Unless explicitly addressed within specific Subtopics, the following scope guidance applies to all Subtopics of the Compensation—Retirement Benefits Topic.

Entities

715-10-15-2
The guidance in the Compensation—Retirement Benefits Topic applies to all employers, including not-for-profit entities (NFPs), that offer pension or other postretirement benefits to their employees, regardless of whether the benefit obligation is funded. NFPs should refer to Subtopic 958-715 when applying the provisions of this Topic.

Transactions

715-10-15-3
The guidance in the Compensation—Retirement Benefits Topic applies to the following types of benefit arrangements:
  1. a
    Any arrangement that is in substance a pension or other postretirement benefit plan, regardless of its form or the means or timing of its funding
  2. b
    Written plans and unwritten plans whose existence is discernible either from a practice of paying pension or other postretirement benefits or from oral representations made to current or former employees
  3. c
    Deferred compensation contracts with individual employees if those contracts, taken together, are equivalent to a plan that provides pension or other postretirement benefits
  4. d
    Health and other welfare benefits expected to be provided to employees deemed to be on a disability retirement.
715-10-15-4
The guidance in this Topic also applies to settlement of all or a part of an employer's pension or other postretirement benefit obligation or curtailment of a pension or other postretirement benefit plan. The guidance applies to employers that provide pension or other postretirement benefits as part of a special termination benefit or special or contractual termination benefits not otherwise addressed in other Subtopics (for example, benefits paid at or before retirement and not paid out of a pension or other postretirement plan).
715-10-15-5
The guidance in this Topic does not apply to the following types of benefit arrangements:
  1. a
    An employer's practice of providing pension or other postretirement benefits to selected employees under individual contracts with specific terms determined on an individual-by-individual basis. Those contracts shall be accounted for individually, following the terms of the contract. See Topic 710.
  2. b
    Postemployment benefits paid after employment but before retirement (for example, layoff benefits), unless payable from a pension or other postretirement plan. See Topic 712.

Other Considerations

715-10-15-6
For purposes of preparing financial statements in accordance with accounting principles generally accepted in the United States, the Compensation—Retirement Benefits Topic includes no special provisions applicable to pension or other postretirement benefit plans or arrangements outside the United States. To the extent that those arrangements are in substance similar to pension or other postretirement benefit plans in the United States, they are subject to the provisions of this Topic.
715-10-15-7
The applicability of this Topic to those plans or arrangements is determined by the nature of the obligation and by the terms or conditions that define the amount of benefits to be paid, not by whether or how a plan is funded, whether benefits are payable at intervals or as a single amount, or whether the benefits are required by law or custom or are provided under a plan the employer has elected to sponsor.
715-10-15-8
This Topic does not change or supersede any of the requirements set forth in Topic 960 for the financial statements of a defined benefit pension plan.

715-10-65Transition and Open Effective Date Information

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715-10-65-1
Paragraph superseded on 06/20/2018 after the end of the transition period stated in Accounting Standards Update No. 2015-04, Compensation—Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets.

Related subtopics