Summary of Statement No. 88
Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination
Benefits (Issued 12/85)
Summary
This Statement establishes standards for an employer's accounting
for settlement of defined benefit pension obligations, for
curtailment of a defined benefit pension plan, and for termination
benefits. This Statement is closely related to FASB Statement No.
87, Employers' Accounting for Pensions, and should be
considered in that context.
Statement 87 continues the past practice of delaying
the recognition in net periodic pension cost of (a) gains and
losses from experience different from that assumed, (b) the effects
of changes in assumptions, and (c) the cost of retroactive plan
amendments. However, this Statement requires immediate recognition
of certain previously unrecognized amounts when certain
transactions or events occur. It prescribes the method for
determining the amount to be recognized in earnings when a pension
obligation is settled or a plan is curtailed. Settlement is defined
as an irrevocable action that relieves the employer (or the plan)
of primary responsibility for an obligation and eliminates
significant risks related to the obligation and the assets used to
effect the settlement. A curtailment is defined as a significant
reduction in, or an elimination of, defined benefit accruals for
present employees' future services.
This Statement incorporates, with certain
modifications, existing standards on employers' accounting for
termination benefits paid to employees, and supersedes FASB
Statement No. 74, Accounting for Special Termination Benefits
Paid to Employees.
Prior to this Statement, an employer that entered
into an asset reversion transaction involving the termination of
one plan and establishment of a successor defined benefit plan was
precluded from immediately recognizing any resulting gain in
earnings. This Statement specifies how that employer should
determine the gain to be recognized in earnings at the time of
initial application of Statement 87.
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