ASC 960-40

Terminating Plans

960 Plan Accounting—Defined Benefit Pension Plans

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In brief

IntermediateSubsequent measurement Disclosure Compensation and benefits Industry-specific

ASC 960-40 covers defined benefit pension plans that are terminating. Once liquidation of the plan is deemed imminent (as defined in 205-30-25-2), the plan's financial statements for periods ending after that determination — including the year-end statements even if the trigger occurred mid-year — must be prepared on the liquidation basis of accounting under Subtopic 205-30. Accumulated plan benefits are measured on that liquidation basis, with all benefits generally reported as vested, and the terminating-plan or wasting-trust circumstances must be disclosed in all subsequent plan financial statements.

Key points (6)

If liquidation of the plan is deemed imminent (per 205-30-25-2) before the end of the plan year, the plan's year-end financial statements must use the liquidation basis of accounting under Subtopic 205-30 (960-40-25-1).
All plan financial statements for periods ending after the determination that liquidation is imminent are prepared on the liquidation basis (960-40-25-2).
For terminating plan assets, accumulated plan benefits are determined using the liquidation basis, and the amount may differ from the actuarial present value of accumulated plan benefits reported for an ongoing plan (960-40-35-2).
Upon termination, in general all benefits should be reported as vested (960-40-35-2).
Once a decision to terminate is made, or when a wasting trust exists (participants no longer accrue benefits but the plan continues until accrued benefits are paid), the relevant circumstances must be disclosed in all subsequent plan financial statements (960-40-50-1).
The scope follows the Overall Subtopic scope in Section 960-10-15 (960-40-15-1).

For students. Know the trigger: it is not the formal termination date but the point at which liquidation becomes "imminent" under 205-30-25-2 — and that trigger flips the whole year-end statement to the liquidation basis, not just the post-trigger stub period. A common mistake is continuing to split accumulated plan benefits between vested and nonvested; on termination essentially all benefits are reported as vested.

terminating plan liquidation basis of accounting liquidation imminent accumulated plan benefits vested benefits wasting trust defined benefit pension plan

Machine-generated study aid for ASC 960-40. Check the source paragraphs below.

960-40-00Status

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960-40-00-1

The following table identifies the changes made to this Subtopic.

Paragraph	Action	Accounting Standards Update	Date

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
Liquidation	Added	Accounting Standards Update No. 2013-07	04/22/2013

960-40-05-1	Amended	Accounting Standards Update No. 2014-06	03/14/2014
960-40-25-1	Amended	Accounting Standards Update No. 2013-07	04/22/2013
960-40-25-2	Amended	Accounting Standards Update No. 2013-07	04/22/2013
960-40-35-1	Superseded	Accounting Standards Update No. 2013-07	04/22/2013
960-40-35-1	Amended	Accounting Standards Update No. 2012-04	10/01/2012
960-40-35-2	Amended	Accounting Standards Update No. 2013-07	04/22/2013

960-40-05Overview and Background

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960-40-05-1

This Subtopic provides guidance for defined benefit pension plans that are terminating plans.

960-40-15Scope and Scope Exceptions

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Overall Guidance

960-40-15-1

This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic (see Section 960-10-15).

960-40-25Recognition

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960-40-25-1

If liquidation of a plan is deemed to be imminent (as defined in paragraph 205-30-25-2) before the end of the plan year, the plan's year-end financial statements shall be prepared using the liquidation basis of accounting in accordance with Subtopic 205-30.

960-40-25-2

Plan financial statements for periods ending after the determination that liquidation is imminent are prepared using the liquidation basis of accounting.

960-40-35Subsequent Measurement

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960-40-35-1

Paragraph superseded by Accounting Standards Update No. 2013-07.

960-40-35-2

For terminating plan assets, accumulated plan benefits shall be determined using the liquidation basis of accounting (see Subtopic 205-30), and their value may differ from the actuarial present value of accumulated plan benefits reported for an ongoing plan. In general, upon termination all benefits should be reported as vested.

960-40-50Disclosure

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960-40-50-1

When the decision has been made to terminate a plan or when a wasting trust (that is, a plan under which participants no longer accrue benefits but that will remain in existence as long as necessary to pay already accrued benefits) exists, the relevant circumstances shall be disclosed in all subsequent financial statements issued by the plan.