In a previous post here, I discussed how, in FASB’s meeting on Wednesday, February 11, 2004, it was decided that “companies should book the amount of federal subsidy they expect to receive under the Medicare Act as a reduction of future benefit costs — instead of as a stream of income from continuing operations.” A friend who understands more than I do all of what is really going on in the accounting world with all of these recent developments has written:
Minor observation on the FASB meeting on Wednesday: I’m not sure that it yet has any practical effect. In January FASB had decided (FAS 106-1) that employers could elect either immediate implementation of accounting for the Medicare Part D special subsidy or else await the final conclusions of FASB’s project to determine the correct accounting for that element. Any employer that elected immediate implementation must of course know that when FASB concludes its current project, then reversal or adjustment of the earlier accounting might be required; but I’m not sure FASB intends that an employer who moved with early adoption must change anything based on interim decisions within that FASB project. Thus, if an employer elected early adoption, then even if the employer and its accountant felt (as some may have) that the subsidy was outside the scope of SFAS 106, the most that this first step in FASB’s follow-through project would do would be to put the employer on early alert of a change that will be necessary upon completion of the FASB project, which might not occur for another year or so.
Also, this from AccountingWeb.com: “FASB Sets New Rules for Cash-Balance Benefits.” As stated in the article, last week FASB also adopted a definition for cash-benefit pension plans:
A cash-balance pension plan is a defined-benefit pension plan (as defined in the Glossary of Statement 87) that defines the promised employee benefit by reference to a notional account balance. An employees’ notional account balance is increased with periodic notional principal credits and notional fixed or variable interest or investment credits, and may be increased for other notional ad hoc credits. Upon separation of employment, for any reason, by a fully vested employee, the employee is entitled to the notional account balance as either a lump sum or an actuarially equivalent annuity either immediately or at a future date. Subject to the terms of the pan or regulatory requirements, an employee may be entitled to a settlement amount greater than the notional account balance due to the crediting of future interest (or investment) credits that are not conditioned upon future service.
FASB is formally reviewing rules governing the way companies measure cash-balance benefits.
Also, businesses that follow international accounting standards will have to start treating stock options as an expense, under a new rule issued today by the International Accounting Standards Board. You can access the press release issued by the IASB here entitled “IASB Issues Standard on Share-based Payment.” Articles on the development:
- SFGate.com: “Accounting body requires firms to treat stock options as an expense.”
- Mercury News: “Global Rules Set for Stock Options.”
(More on the stock option expensing debate here.)
Finally, Tech Central Station has this op-ed: “Green Eyeshade Killers.” James Glassman writes:
Candidates are obsessed with “outsourcing,” the alleged loss of tech jobs overseas. . . There’s a far, far more dangerous threat to our global preeminence in technology. It involves an accounting change. Don’t touch that dial! Accounting is boring, but this is important. Your job may depend on it.”