The FASB provided new practical expedients for the measurement date of defined benefit plan assets and obligations.

1. FASB simplifies the accounting for defined
benefit plans
What happened?
On April 15, 2015, the FASB issued Accounting Standards Update 2015-04,
Compensation—Retirement Benefits, to provide a practical expedient related to the
measurement date of defined benefit plan assets and obligations.
The practical expedient allows employers with fiscal year-end dates that do not coincide
with a calendar month-end (e.g., companies with a 52/53-week fiscal year) to measure
pension and post-retirement benefit plan assets and obligations as of the calendar
month-end date closest to the fiscal year-end. Entities that choose to apply the expedient
are required to adjust the measurement of defined benefit plan assets and obligations for
any contributions or significant events (such as a plan amendment, settlement, or
curtailment that calls for a remeasurement pursuant to existing requirements) that occur
between the month-end measurement date and an entity’s fiscal year-end (the
“intervening period”).
If an entity elects the practical expedient, disclosures about the fair value hierarchy and
classes of plan assets should not be adjusted for the effects of contributions or settlement
payments made during the intervening period. Instead, an entity would include a
reconciling item in the footnotes to disclose the amount of the contribution or the
amount used to fund the settlement, in order to permit reconciliation to the ending
balance of the fair value of plan assets at year-end.
For example, assume an entity with a January 2, 2016 fiscal year-end applies the
practical expedient and measures its defined benefit plan assets and obligation as of
December 31, 2015. If the entity makes a contribution on January 1, 2016 (i.e., after the
measurement date but before the fiscal year-end), it would adjust the funded status of
the defined benefit plan recognized in the balance sheet to reflect the contribution as an
addition to plan assets. However, the entity would not be required to adjust the fair value
hierarchy and classes of plan assets disclosed in the footnotes. Instead, the entity should
separately disclose the amount of the contribution to reconcile to the fair value of plan
assets at the fiscal year-end date.
The new guidance includes a similar practical expedient for interim remeasurements for
significant events that occur on other than a month-end date, which permits entities to
remeasure defined benefit plan assets and obligations using the month-end date that is
closest to the date of the significant event, adjusted as necessary for the effects of the
event itself.
Why is this important?
The practical expedients will reduce the costs and complexity of measuring the fair value
of defined benefit plan assets for entities with fiscal year-ends or significant events that
do not fall on a month-end, by allowing those entities to measure the plan assets as of the
date that valuation information is often provided by third parties (that is, as of month-
No. US2015-11
April 17, 2015
At a glance
Reporting entities are now
permitted to measure
defined benefit plan assets
and obligations as of the
month-end closest to their
fiscal year-end. A similar
practical expedient is
available for interim
remeasurements of
significant events.
National Professional Services Group | CFOdirect Network – www.cfodirect.pwc.com In brief 1

2. end). Therefore, the practical expedients alleviate the potentially difficult task of rolling
forward or back the fair values of plan assets and actuarial valuation of liabilities when an
entity’s fiscal year-end, or the date of a significant event, does not coincide with a month-
end.
Application of the practical expedient for measuring plan assets and obligations at year-
end is an accounting policy election that must be applied consistently from year-to-year
to all of an entity’s defined benefit plans. Entities must disclose their election of the
practical expedient.
As this is an accounting policy election, entities would either need to adopt it upon the
effective date of the new standard, or demonstrate that the new policy is “preferable” if
adopted at a later date.
The decision to apply the practical expedient to interim remeasurements for significant
events can be made for each individual event. That is, it is not an accounting policy
election.
What's next?
For public business entities, the standard is effective for annual reporting periods
beginning after December 15, 2015, including interim periods therein (that is, January 1,
2016 for calendar year-end public entities). For all other entities, the standard is effective
for annual reporting periods beginning after December 15, 2016, and interim periods
within annual periods beginning after December 15, 2017. Early adoption is permitted. If
elected, the practical expedients would be applied prospectively.
At this time, the practical expedient may not be elected by employee benefit plans.
Several areas of employee benefit plan accounting and reporting, including a similar
measurement date practical expedient, are currently being addressed separately by the
Emerging Issues Task Force.
Questions?
PwC clients who have questions about this
In brief should contact their engagement
partner. Engagement teams who have
questions should contact the compensation
team in the National Professional Services
Group (1-973-236-7802).
Authored by:
Jay Seliber
Partner
Phone: 1-973-236-7277
Email: jay.seliber@us.pwc.com
Michele Marino
Manager
Phone: 1-973-236-4234
Email: michele.marino@us.pwc.com
Jim Gazley
Director
Phone: 1-973-236-5595
Email: jim.gazley@us.pwc.com
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