Plan Accounting—Defined Contribution Pension Plans

ASC 962 governs financial reporting by a defined contribution pension plan as a reporting entity in its own right, as distinguished from the sponsoring employer's accounting under Topic 715. The Overall subtopic (962-10) sets the objective—providing information useful in assessing the plan's present and future ability to pay benefits when due—and directs that net assets available for benefits, which equal the sum of participants' individual account balances, be measured at values meaningful to users, principally the amount a participant could currently withdraw, borrow, or transfer (962-10-10-1; 962-10-05-5 through 05-6). The Terminating Plans subtopic (962-40) requires the plan to switch to the liquidation basis of accounting under Subtopic 205-30 once liquidation is deemed imminent (962-40-25-1 through 25-2), and to disclose the circumstances in all subsequent financial statements once a termination decision is made or a wasting trust exists (962-40-50-1). The unifying idea is that because participants bear the investment risk in a defined contribution plan, plan reporting is oriented to participants' individual account values rather than to any promised benefit obligation.

Subtopics

1. 10Overall18 ¶

   ASC 962-10 is the Overall subtopic for financial reporting **by** a defined contribution pension plan itself (not by the sponsoring employer, which follows Topic 715). Its objective is to provide information useful in assessing the plan's present and future ability to pay benefits when due; because plan net assets available for benefits equal the sum of participants' individual account balances, those net assets are measured and reported at values meaningful to users—principally the amount a participant could currently withdraw, borrow, or transfer. It applies to all employee benefit plans providing benefits based on amounts contributed to an employee's individual account, and not to defined benefit plans (Topic 960) or health and welfare plans (Topic 965).

   0005101565
2. 40Terminating Plans7 ¶

   ASC 962-40 governs the accounting and reporting by defined contribution pension plans that are terminating. Its core rule is that once liquidation of the plan is deemed imminent under ASC 205-30, the plan must prepare its financial statements—including year-end statements for a plan year in which imminence arose before year end—on the liquidation basis of accounting. The plan must also disclose the relevant circumstances in all subsequent financial statements once a termination decision is made or a wasting trust exists.

   000515253550