ASU 2015-12: Applying the New Reporting Standard for Employee Benefit Plans Ready for "Simplification?" FBRIC Measurement, Plan Investment Disclosures, Measurement Dates and More TUESDAY, FEBRUARY 23, 2016, 1:00-2:50 pm Eastern IMPORTANT INFORMATION This program is approved for 2 CPE credit hours . To earn credit you must: • Participate in the program on your own computer connection (no sharing) – if you need to register additional people, please call customer service at 1-800-926-7926 x10 (or 404-881-1141 x10). Strafford accepts American Express, Visa, MasterCard, Discover . Listen on-line via your computer speakers. • Respond to five prompts during the program plus a single verification code . You will have to write down • only the final verification code on the attestation form, which will be emailed to registered attendees. To earn full credit, you must remain connected for the entire program. • WHO TO CONTACT For Additional Registrations : -Call Strafford Customer Service 1-800-926-7926 x10 (or 404-881-1141 x10) For Assistance During the Program : -On the web, use the chat box at the bottom left of the screen If you get disconnected during the program, you can simply log in using your original instructions and PIN.
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ASU 2015-12 February 23, 2016 Sharon A. Bradley, Partner Henry Martin, CPA, Senior Manager Daszkal Bolton Daszkal Bolton sbradley@dbllp.com hmartin@dbllp.com Susan J. Peirce, Principal Apple Growth Partners speirce@applegrowth.com
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D D ASU 2015-12 Applying the New Reporting Standards for B Employee Benefit Plans February 23, 2016 Sharon A. Bradley & Henry Martin Daszkal Bolton
ASU 2015-12 Reason for issuing update Previous reporting Changes to current Standard Part I – Fully- Benefit Responsive Investment Contracts Part II – Plan Investment Disclosures Part III - Measurement Date Practical Expedient. Practical considerations for implementation Communication to Plan Sponsor’s Questions ?? 6
Why ASU 2015-12 Reduce complexity in EB plan accounting. Reduce cost and complexity and maintain or improve the usefulness of the information provided. Who is affected? Essentially all EB plans will describe in each Part I, II and III. 7
ASU 2015-12 On July 31, 2015, the FASB issued ASU 2015-12, a three-part standard that provides guidance on certain aspects of the accounting by employee benefit plans. (DB, DC and H&W Plans). The ASU, was in response to consensuses reached by the EITF, (1) requires an employee benefit plan to use contract value as the only measurement amount for fully benefit-responsive investment contracts (FBRICs), (2) simplifies and increases the effectiveness of plan investment disclosure requirements for employee benefit plans, and (3) provides employee benefit plans with a measurement-date practical expedient similar to the practical expedient provided to employers in ASU 2015-04. Plans were allowed to early adopt this ASU for all years not issued even if prior to issuance of ASU 2015-12. 8
Previous Fair Value Reporting Standard Fully-benefit-responsive investment contracts (FBRICs) Previous guidance required plans to: Measure FBRICs at both fair value (ASC 820) for presentation and disclosure while acknowledging contract value as the relevant measure. Present an adjustment on the face of the financial statements from fair value and contract value. The average yield earned by the FBRIC for each period for which the statement of net assets available for benefits is presented Disclosures about FBRICs that are required by ASC 820, ASC 962 and ASC 965. Footnotes must describe the nature of the investment contract and how it operates, including information on the credit rating and average yield for the investment contracts. See slides 8, 9 and 10 for sample disclosure. 9
Previous Fair Value Reporting Standard 10
Previous Fair Value Reporting Standard 11
Previous Fair Value Reporting Standard 12
Part I: Fully-Benefit-Responsive Investment Contracts 13
Simplification Changes to ASU 2015-12 to FBRICs The definition of an FBRIC has not changed, however Part 1 of ASU 2015-12 amends the guidance to FBRICs as follows: No adjustment from fair value to contract value is required for FBRICs on the face of the financial statements. Plans must now report FBRICs at contract value, which is the value that trustees report on the certified trust statements. (typically) No reconciliation to the Form 5500 needed. Plans are still required to include the following disclosures for FBRICs: Total contract value of each type of FBRIC (traditional and synthetic investment contracts) on either the face of the Plan’s financial statements or the footnotes. Description of the nature of each investment contract and how each operates. Description of the events that would cause the Plan to transact at amount different from contract value. Description of events that would allow the issuer to terminate the contracts or settle at an amount different from contract value. 7 14
Simplification Changes to ASU 2015-12 to FBRICs, continued Other disclosures related to FBRICs are eliminated. Average-yield disclosure and the methodology used to calculate the interest credit rate. ASC 820 hierarchy leveling, valuation techniques and inputs, and the level 3 rollforward. FBRICs are not included in the ASC hierarchy table. FBRICs held in a master trust are subject to the same presentation and disclosure requirements as FBRICs held by the Plan. Indirect investments in FBRICs (Ex: investments in stable value common or collective trusts (CCTs)) are not in the scope of the FBRIC guidance. When a plan invests in a stable value CCT, those holdings are generally in an investment company that calculates NAV per share (or its equivalent). The relevant measure for a FBRIC held by the CCT is contract value. Therefore, the amount previously presented as a contract value in a plan’s financial statements is now presented at fair value. Which is consistent with other CCTs and reported at fair value under the new guidance. 15
Simplification Changes to ASU 2015-12 to FBRICs, continued Indirect investments in FBRICs (Ex: investments in stable value common or collective trusts (CCTs)) are not in the scope of the FBRIC guidance. Total net assets available for benefits does not change, and the adjustment from fair value to contract value that was previously reported is eliminated. See slides 6 and 7 for sample financial statements. 16 16
Simplification Changes to ASU 2015-12 to FBRICs, continued 17
Simplification Changes to ASU 2015-12 to FBRICs, continued 18
Part II: Plan Investment Disclosures Susan J. Peirce Apple Growth Partners
Plan Investment Disclosures • Affects all types of plans • Simplifies the level of disaggregation for investments measured using fair value • ASU is to be applied retrospectively 20
Disaggregation • Provides consistency with the level of disaggregation provided by most trustees, custodians and insurance companies and with the information required in Form 5500 • Applies to investments held in a master trust • Plans are exempt from the requirements of ASC 820-10-50-2B to disaggregate assets by class (e.g., nature, characteristics, risks) 21
Disaggregation • Disaggregate by general type of investment (e.g., common stocks, corporate bonds, mutual funds) • Disclosure of fair value information required by ASC 820 shall be provided by general type rather than class (e.g., valuation techniques, inputs, level 3 reconciliation) • Self-directed brokerage accounts are one general type 22
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