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This Audit and Accounting Guide provides the latest information on accounting and auditing issues affecting all types of employee benefit plans. Updated with conforming changes as of March 1, 2009, it summarizes applicable requirements and practices, and delivers "how-to" advice to prepare, audit, and report on financial statements of employee benefit plans. To prepare you for the transition to the FASB Accounting Standards Codification™ we have updated this guide for the Codification which is expected to become effective July 1, 2009. At that time the Codification will become the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the Securities and Exchange Commission (SEC). Let this guide help you in the transition!
This guide covers FASB Statement No. 157, Fair Value Measurements, including illustrative financial statements that reflect the presentation and disclosures provisions of this standard.
Additionally, the guide includes a topical index to help you navigate to the areas of interest to you!
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FASB Accounting Standards Codification™
The accounting guidance in this guide has been conformed to reflect reference to FASB Accounting Standards Codification™ (ASC) as it existed on March 1, 2009 (through FASB ASC Update 2009-18). Although FASB ASC is not effective at this date, FASB is expected to issue the ASC as authoritative July 1, 2009; therefore, this guide has been conformed to FASB ASC to assist you during this transition.
An exception to this is accounting guidance included in certain exhibits and illustrative financial statements included in this guide. These exhibits and illustrative financial statements are included for fiscal year-ends up to and as of the date of this guide, March 1, 2009, and at that time FASB ASC is not yet effective. These exhibits and illustrative financial statements will be updated in a subsequent edition of this guide.
FASB Accounting Standards Codification™ Overview
FASB ASC, whichwas released on January 15, 2008, for a 1-year verification period, disassembled and reassembled thousands of nongovernmental accounting pronouncements (including those of FASB, the EITF, and the AICPA) to organize them under approximately 90 topics. FASB ASC also includes relevant portions of authoritative content issued by the Securities and Exchange Commission (SEC) and select SEC staff interpretations and administrative guidance issued by the SEC. However, FASB ASC is not the official source of SEC guidance and does not contain the entire population of SEC rules, regulations, interpretive releases, and staff guidance. FASB ASC is not intended to change GAAP or any requirements of the SEC. Rather, it is part of FASB's efforts to reduce the complexity of accounting standards and also to facilitate international convergence. Moreover, FASB ASC does not include governmental accounting standards. The purposes behind the codification project include the following:
| • | Reduce the amount of time and effort required to solve an accounting research issue |
| • | Mitigate the risk of noncompliance with standards through improved usability of the literature |
| • | Provide accurate information with real-time updates as new standards are released |
| • | Assist FASB with the research and convergence efforts required during the standard-setting process |
| • | Become the authoritative source of literature for the completed eXtensible Business Reporting Language taxonomy |
| • | Clarify that guidance not contained in FASB ASC is not considered authoritative |
With the release of FASB ASC in January 2008, FASB launched an Internetbased research system, the FASB Accounting Standards Codification™ Research System, at http://asc.fasb.org, which includes a cross reference report to identify where the topics addressed in the standards being incorporated into the codification reside in FASB ASC. This functionality may be discontinued over time by FASB.
FASBASC features a notice to constituents, which explains the scope, structure, and usage of consistent terminology of FASB ASC. Users are encouraged to read this notice. Refer to the FASB ASCWeb site at http://asc.fasb.org, or by linking to it from the FASB Web site at www.fasb.org.
FASB is expected to issue FASB ASC as authoritative effective July 1, 2009, at which time it will become the single source of authoritative U.S. accounting and reporting standards, other than guidance issued by the SEC, for nongovernmental entities. FASB ASC will supersede all then-existing, non-SEC accounting and reporting standards for nongovernmental entities. Once effective, all other nongrandfathered, non-SEC accounting literature not included in FASB ASC will become nonauthoritative. After the effective date of FASB ASC, FASB will no longer consider new standards authoritative in their own right. Instead, new standards will serve only to update FASB ASC and provide the historical basis for conclusions of a new standard.†
Because FASB ASC is expected to become authoritative on July 1, 2009, accounting guidance in this guide has been conformed to reflect reference to FASB ASC using the style articulated in the FASB ASC Notice to Constituents. This guide has been conformed to FASB ASC as it existed on March 1, 2009 (through FASB ASC Update 2009-18). An exception to this is accounting guidance included in certain exhibits and illustrative financial statements included in this guide. These exhibits and illustrative financial statements are included for fiscal year-ends up to and as of the date of this guide, March 1, 2009, and at that time FASB ASC is not yet effective. These exhibits and illustrative financial statements will be updated in a subsequent edition of this guide.
Due to the fact that a majority of the users of this guide will be using it to assist with the issuance of employee benefit plan financial statements for the 2008 plan year, references to authoritative accounting pronouncements in examples of correspondence and the illustrative financial statements in this guide use traditional references (for example, FASB Statement No. 157, Fair Value Measurements). Users should be cautioned that any correspondence prepared or financial statements issued after FASB ASC becomes authoritative would use FASB ASC style referencing. The specific items affected are
| • | chapter 10, exhibit 10-1, "Illustrative Letter to Plan Actuary" |
| • | chapter 12, exhibit 12-1, an illustrative management representation letter |
| • | appendix D, "Illustration of Financial Statements: Defined Benefit Pension Plan" |
| • | appendix E, "Illustrations of Financial Statements: Defined Contribution Plans" |
| • | appendix F, "Illustrations of Financial Statements: Employee Health and Welfare Benefit Plans" |
To assist with referencing, readers should consult appendix C, "Cross Reference of FASB and AICPA Accounting Pronouncements to the FASB Accounting Standards Codification™ (ASC)," of this guide.
FASB ASC Structure and Referencing FASB ASC uses a topical structure in which guidance is organized into areas, topics, subtopics, sections, and subsections. These terms are defined as follows:
| • | Areas are the broadest category in FASB ASC and represent a grouping of topics. |
| • | Topics are the broadest categorization of related content and correlate with the International Accounting Standards (IASs) and International Financial Reporting Standards (IFRS). |
| • | Subtopics represent subsets of a topic and are generally distinguished by type or scope. |
| • | Sections indicate the nature of the content such as recognition, measurement, or disclosure. The sections' structure correlates with the IASs and IFRS. |
| • | Subsections allow further segregation and navigation of content. |
Topics, subtopics, and sections are numerically referenced. This effectively organizes the content without regard to the original standard setter or standard from which the content was derived. An example of the numerical referencing is FASB ASC 305-10-05, in which 305 is the topic (Cash and Cash Equivalents), 10 represents the "Overall" subtopic, and 05 represents section ("Overview and Background").
Employee Benefit Plan Sections of FASB ASC
Plan accounting may be found in the following sections of the codification:
| • | FASB ASC 960, Plan Accounting—Defined Benefit Pension Plans |
| • | FASB ASC 962, Plan Accounting—Defined Contribution Pension Plans |
| • | FASB ASC 965, Plan Accounting—Health and Welfare Benefit Plans |
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