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On March 10, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07
Compensation: Retirement Benefits (Topic 715). The ASU seeks to improve the presentation of pension and post-retirement benefit costs by disaggregating the service cost component from the other components of net benefit cost. The ASU requires that the service cost be reported in the same line item(s) as other compensation costs arising from services rendered by employees during the period.
The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 should be presented in the income statement outside a subtotal of income from operations, and must be appropriately described if a separate line item(s) is used. If a separate line item(s) is not used, the line item(s) used to present the other components must be appropriately disclosed.
The ASU also allows only the service cost component to be eligible for capitalization, if applicable.
The amendments apply to all entities, including not-for-profit entities, that offer defined benefit pension plans, other post-retirement benefit plans or other types of benefits within the scope of Topic 715. The amendments are effective as follows:
Early adoption is permitted and should be within the first interim period if an entity issues interim financial statements. Disclosures of the nature of and reason for the change in accounting principle are required in the first interim and annual periods of adoption.
The ASU should be applied retrospectively for the presentation of the service cost component and other components of net benefit cost in the income statement. The ASU should be applied prospectively, on and after the effective date, for the capitalization of the service cost component.
The ASU provides a practical expedient that permits an entity to use the amounts disclosed in its pension and other post-retirement benefit plan note for the comparative periods as the estimation basis for applying the retrospective presentation requirements. Disclosure of the use of this practical expedient is required.
To access the full script of ASU No. 2017-07, click
For more information on the financial reporting library, contact a local
MNP Assurance Professional, or
Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of March 10, 2017. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2017. All rights reserved.
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