The Financial Accounting Standards Board (FASB) is considering requiring corporations to provide more details about pension plan allocations, including alternative investments. FASB says it is responding to shareholder demands for more transparency so they can better gauge portfolio risks. At a meeting Feb. 13, the FASB board directed staff members to draw up proposed amendments to FAS 132 (Employers' Disclosures about Pensions and other Post-Retirement Benefits) that would compel companies to list pension fund assets by categories, such as stocks, bonds and alternative investments, such as collateralized debt obligations (CDOs).
The increased use of alternative investments raised user concerns that "current disclosures of plan assets are not detailed enough to determine what types of assets are held in post-retirement benefit plans," according to a FASB staff memo. "Disclosure of more specific asset categories would enable users to better assess the timing, uncertainty and amount of future cash flows related to an increase or decrease in the value of plan assets."
Recommended amendments, according to a handout issued at the board meeting, would also force companies to reveal if risks are concentrated in individual companies, industries, countries or types of securities. It would also require certain disclosures about fair value measurements of plan assets similar to FAS 157.
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