Читать книгу Auditing Employee Benefit Plans - Josie Hammond - Страница 63

FASB ASC 962, Plan Accounting – Defined Contribution Plans, and FASB ASC 965, Plan Accounting – Health and Welfare Benefit Plans, provide guidance for determining the appropriate reporting and valuation of investment contracts.

Defined contribution pension plans and health and welfare benefit plans are to report direct investments in fully benefit-responsive investment contracts at contract value because contract value is the relevant measure for the portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts. Contract value is the amount participants normally would receive if they were to initiate permitted withdrawals under the terms of the underlying plan. A synthetic guaranteed investment contract that meets the definition of a fully benefit-responsive investment contract and that is held by an employee benefit plan is also subject to this guidance and is reported in one line item on the statement of net assets available for benefits. However, for the Schedule of Assets (Held at End of Year), the wrapper and underlying investments of a synthetic investment contract are to be listed separately.

Help desk. Non-fully benefit-responsive contracts are to be reported at fair value.

In addition, fully benefit-responsive investment contracts, as defined by the FASB ASC glossary, are limited to direct investments between the plan and the issuer. Plans may indirectly hold fully benefit-responsive investment contracts through beneficial ownership of common collective trust funds (CCTs), which own investment contracts. Insurance company pooled separate accounts (PSAs) that hold investment contracts also have similar characteristics. In the conclusions reached in paragraph BC9 of Part I of FASB ASU No. 2015-12, indirect investment holdings do not meet the definition of fully benefit-responsive as the investment contract is not effected directly between the plan and the issuer. Although these do not meet the definition of fully benefit-responsive investment contracts and, therefore, are not reported at contract value, they may qualify for the net asset value per share (or its equivalent) measurement practical expedient in FASB ASC 820.

The definition of benefit responsiveness considers an investment contract to be fully benefit responsive if all of the following criteria are met:

1 The investment contract is between the plan and the issuer; it cannot be assigned or sold without consent of the issuer.

2 The contract issuer must be obligated torepay principal and interest; orprovide prospective interest crediting rate that will be not less than zero.

3 The contract requires all permitted participant initiated transactions (such as withdrawal of benefits, loans or transfers between funds within the plan) to occur at contract value without conditions, limits, or restrictions.

4 An event that limits the ability of the plan to transact at contract value with the participants in the plan and the issuer (such as premature termination of the contract, plant closing, layoffs, plan termination, bankruptcy, mergers, and early retirement incentives) must be probable of not occurring.

5 The plan itself must allow participants reasonable access to their funds.

Help desk. Presentation example:

Example presentation for the statement of net assets available for benefits:

Investments (at fair value)	$ 2,900,000
Investments (at contract value)	7,000,000
Receivables	100,000
Total assets	10,000,000
Accrued expenses	200,000
Total liabilities	200,000
Net assets available for benefits	$ 9,800,000

Benefit-responsive contracts require certain disclosure in the notes, such as description of the nature of the investment contracts by type (for example, traditional or synthetic), total contract value by each investment contract type, and any limitation on the plan’s ability to transact at contract value, as well as events or circumstances which allow issuers to terminate and settle the contracts at an amount different than contract value.