April 25, 2016

The FASB released a proposed ASU – Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans in January 2016. The proposal was issued as part of the FASB’s Disclosure Framework project and intended to improve the effectiveness of pension disclosures by eliminating unimportant information and adding other pertinent information in the notes to the financial statements, as well as organizing the disclosures around certain broad objectives.

We support the Board’s overall objective in the Disclosure Framework project to make the disclosures more effective, balancing the information needs of financial statement users with the costs and complexity of producing that information. We also support the Board’s intent to clarify that entities have flexibility to determine what information is material for disclosure. We believe the proposed changes in the exposure draft will enable preparers to eliminate less relevant information from the footnotes. However, we also believe the specific new disclosures proposed to be added or removed will not result in significantly better decision-useful information.

Ms. Susan Cosper
Technical Director
Financial Accounting Standards Board
401 Merritt 7,
P.O. Box 5116
Norwalk, CT 06856-5116

April 25, 2016

Dear Ms. Cosper,

PricewaterhouseCoopers LLP appreciates the opportunity to comment on the FASB’s Proposed Accounting Standards Update, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans (the “ED”) and the supplemental paper included on the FASB website, Decision Questions Considered in Establishing Disclosure Requirements (the“supplemental paper”).

We support the Board’s overall objective in the Disclosure Framework project to make financial statement disclosures more effective, balancing the information needs of financial statement users with the costs and complexity of producing that information. Further, we agree with the FASB’s expected approach of considering the feedback on the ED with feedback on the disclosure framework proposed in March 2014 and on the other tests of that framework in the areas of fair value measurement, income taxes, inventory, and interim reporting. We propose that no changes to the disclosure requirements in any of those areas be finalized until all feedback is considered.

We are providing our views on whether the proposal enhances the clarity of disclosures or provides better decision-useful information related to defined benefit plans. That is, we are commenting on the merits of the proposed disclosures and on how the proposed framework was applied, without expressing a view on the proposed disclosure framework directly.

We support the elimination of phrases like “an entity shall at a minimum provide” and other wording that could appear to limit an entity’s discretion to omit immaterial disclosures. We believe this supports the Board’s intent to clarify that entities have flexibility to determine what information is material for disclosure in their financial statements.

While the ED delineates the proposed disclosures applicable to public and nonpublic entities, we believe preparers may be confused by the ED’s reference to “nonpublic entities” as ASC 715 contains multiple definitions of that term. For example, ASC 715-20-20 contains two different definitions of “nonpublic entity,” and ASC 715-30-20 contains a third. As a result, preparers may be unsure which disclosures apply in their specific circumstances. The term “nonpublic entity” is a dated definition that may create confusion and should not be used. New standards and amendments to existing standards should use or be based on the definition of a “public business entity” in the Master Glossary (from ASU 2013-12, Definition of a Public Business Entity). We continue to believe that practice would be better served by a single definition of a private company. For the sake of clarity, we believe the Board should specify which disclosures would be required using current and consistent terminology.

The appendix to this letter contains our responses to the Questions for Respondents in the ED, which includes additional observations and in some cases expands on our comments above. If you have any questions, please contact Patrick Durbin at (973) 236-5152 or Jay Seliber at (973) 236-7277.

Sincerely,

PricewaterhouseCoopers LLP

Overall, we believe the proposed changes in the ED describing the objectives of the different categories of disclosures should enable preparers to eliminate less relevant information from the footnotes. However, we believe the specific new disclosures proposed to be added or removed will not result in significantly better decision-useful information.

Following are our specific comments on each of the proposed changes.

We agree with eliminating the required disclosure because the accumulated benefit obligation (“ABO”) no longer impacts financial statement recognition under ASC 715. However, we do note that certain users, such as analysts, view the ABO as useful in understanding what the entity’s obligation would be if the entity froze or terminated the plan as of the date of the financial statements.

As discussed above, we agree with eliminating the required disclosure but note that some users continue to find disclosures related to the ABO useful.

We agree with eliminating the required disclosure.

We agree with eliminating the required disclosure.

We note that material transactions of this type would likely be subject to the disclosure provisions of ASC 850-10-50, Related Party Disclosures. Thus, those disclosure requirements do not need to be repeated in ASC 715.

We agree with eliminating the required disclosure.

We agree with eliminating the proposed changes.

We agree with adding the required disclosure.

We agree with adding the required disclosure.

We do not agree with adding the required disclosure. We believe the disclosures from ASC 820, Fair Value Measurement, on assets measured using the NAV practical expedient are excessive in light of the long-term nature of benefit plans and the nature of benefit plan trusts that significantly limit a plan sponsor’s access to the investments. Since the entity does not have direct access to funds held in a benefit plan trust, we believe disclosure of the redemption rights or restrictions and capital contribution commitments— essentially liquidity-oriented disclosures—are not relevant. Furthermore, adding these disclosures would result in far more disclosure for plan assets measured using the NAV practical expedient than for plan assets in Level 2 and Level 3 of the fair value measurement hierarchy.

We agree with adding the required disclosure.

We understand that adding the required disclosure for nonpublic entities would be consistent with the disclosure for public entities. However, we believe the Board should eliminate the requirement to disclose the impact of the one-percentage-point change in health care cost trend rates for all entities. This is just one of many key assumptions in the measurement of defined benefit obligations, and no sensitivity disclosures are required for changes in other key assumptions (e.g., discount rates, compensation increases, mortality, etc.) that could have an equal or greater impact on the current measurement of the obligation.

In paragraph 355 of FAS 106 (the original basis for including this disclosure for other postretirement benefit plans), we note that the FASB initially proposed sensitivity disclosures for pension costs but ultimately decided not to require those disclosures because the cost would outweigh the benefits. However, the Board believed at the time that it was more compelling to require such sensitivity disclosures for retiree medical costs because financial statement users "are considerably less familiar with postretirement health care measurements than with pension measurements and with the subjectivity of the health care cost trend rate and the significant effect that assumption may have on measurement of the postretirement health care obligation." In the 25 years since FAS 106 was issued, we believe financial statement users have become familiar with the manner in which retiree healthcare obligations are calculated and with the key drivers of those liabilities. Therefore, we recommend that this disclosure be eliminated for all entities.

We expect that preparers will be able to accumulate the information necessary to provide the proposed disclosures and the information will be auditable.

While the determination of whether the proposed disclosures impose significant incremental costs to entities would be best answered by preparers, we would not anticipate that the proposed disclosures would require significant incremental costs.

We believe the following additional disclosures should be required by Subtopic 715-20:

Other than as indicated in the responses to the other questions, we do not propose to remove any other disclosures from ASC 715-20. However, we suggest including the "to the extent material" qualifier before "shall be disaggregated" in ASC 715-20-50-2 in the ED regarding the disclosure of domestic and foreign plans, to be consistent with the notion in ASC 715-20-50-1A.

While this question would be best answered by preparers, we anticipate that the proposed guidance would not require significant time to adopt. We support a one-year delay in the effective date for nonpublic entities, consistent with the issuance of other recent standards.

We believe that early adoption should be permitted.