FASB Improves the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost

April 2017

The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments apply to all employers, including not-for-profit entities, that offer their employees defined benefit pension plans, other post-retirement benefit plans, or other types of benefits accounted for under Topic 715, Compensation — Retirement Benefits. 

The amendments require employers to report the relevant service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The amendments require other components of net benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item (or items) is used to present the other components of net benefit cost, that line item (or items) must be appropriately described. If a separate line item (or items) is not used, the line item (or items) used in the income statement to present the other components of net benefit cost must be disclosed.

The amendments also allow only the service cost component to be eligible for capitalisation when applicable (eg as a cost of internally manufactured inventory or a self-constructed asset).

The amendments are effective for public business entities for annual periods beginning after 15 December 2017, including interim periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after 15 December 2018, and interim periods within annual periods beginning after 15 December 2019. Early adoption is permitted. 

ASU 2017-07 is available on this link.

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