The Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU), Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
The ASU is intended to improve financial reporting of pension and other postretirement benefit plans related to the presentation of defined benefit costs in the income statement by:
- Requiring a reporting organization to separate the service cost component from the other components of net benefit cost for presentation purposes;
- Providing explicit guidance on how to present the service cost component and other components of net benefit cost in the income statement; and
- Allowing only the service cost component of net benefit cost to be eligible for capitalization.
The ASU applies to all employers, including not-for-profit entities, that offer to their employees defined benefit pension plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715 (Compensation—Retirement Benefits).
For public companies, the amendments in this ASU are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance.