ASC 962-40

Terminating Plans

962 Plan Accounting—Defined Contribution Pension Plans

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In brief

IntermediateCompensation and benefits Presentation Disclosure Industry-specific

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.

Key points (5)

This Subtopic applies to defined contribution plans that are terminating plans (962-40-05-1) and follows the scope of Subtopic 962-10 (962-40-15-1).
If liquidation of the plan is deemed imminent, as defined in 205-30-25-2, before the end of the plan year, the year-end financial statements shall be prepared using the liquidation basis of accounting under Subtopic 205-30 (962-40-25-1).
Plan financial statements for all periods ending after the determination that liquidation is imminent are prepared on the liquidation basis (962-40-25-2).
When a decision to terminate the plan has been made, or when a wasting trust exists (participants no longer accrue benefits but the plan continues until accrued benefits are paid), the relevant circumstances shall be disclosed in all subsequent plan financial statements (962-40-50-1).
Former subsequent-measurement guidance at 962-40-35-1 was superseded by ASU 2013-07, which relocated liquidation-basis measurement to Subtopic 205-30.

For students. Exam questions turn on the trigger: it is not the decision to terminate but the point at which liquidation becomes "imminent" under 205-30-25-2 that forces the liquidation basis—and if that point falls before plan year end, the year-end statements themselves must use it. A common misunderstanding is assuming a wasting trust automatically requires liquidation-basis accounting; it only triggers the disclosure requirement in 962-40-50-1.

terminating plan liquidation basis of accounting liquidation imminent wasting trust defined contribution pension plan plan financial statements termination disclosure

Machine-generated study aid for ASC 962-40. Check the source paragraphs below.

962-40-00Status

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962-40-00-1

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 (3rd def.)	Added	Accounting Standards Update No. 2014-06	03/14/2014
Defined Contribution Plan	Amended	Accounting Standards Update No. 2014-06	03/14/2014
Liquidation	Added	Accounting Standards Update No. 2013-07	04/22/2013

962-40-25-1	Amended	Accounting Standards Update No. 2013-07	04/22/2013
962-40-25-2	Amended	Accounting Standards Update No. 2013-07	04/22/2013
962-40-35-1	Superseded	Accounting Standards Update No. 2013-07	04/22/2013
962-40-35-1	Amended	Accounting Standards Update No. 2012-04	10/01/2012
962-40-50-1	Amended	Accounting Standards Update No. 2014-06	03/14/2014

962-40-05Overview and Background

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962-40-05-1

This Subtopic provides guidance for defined contribution plans that are terminating plans.

962-40-15Scope and Scope Exceptions

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Overall Guidance

962-40-15-1

This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic (see Section 962-10-15).

962-40-25Recognition

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962-40-25-1

If the 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.

962-40-25-2

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

962-40-35Subsequent Measurement

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962-40-35-1

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

962-40-50Disclosure

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962-40-50-1

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.