Liquidation is assumed to occur without the PBGC having filed a prior claim leaving the PBGC holding an unsecured subordinated claim for the difference between the value of the accumulated benefit obligation
and the value of the assets in the pension fund at the liquidation date.
FASB Statement 132 permits the aggregation of these disclosures with other disclosures about plans with accumulated benefit obligations
in excess of assets.
The disclosures for earlier annual periods presented for comparative purposes should be restated for (a) the percentages of each major category of plan assets held, (i3) the accumulated benefit obligation
, and (c) the assumptions used in the accounting for the plans.
The FASB in this standard eliminates the following previous disclosure requirements pertaining to pensions and other post-retirement benefits: (1) accumulated pension benefit obligations [ABO] only for plans having assets in excess of the ABO, but not for plans in which the ABO exceeds the plan assets; (2) vested benefit obligations; and (3) an analysis of other post-retirement accumulated benefit obligations
for retirees, other fully eligible individuals, and active, but not fully eligible, participants.
As of December 31, 2005, the plan's accumulated benefit obligation
exceeds the plan assets by $1,100,000; its unrecognized transition obligation was $63,000.
However, since nonqualified plans generally do not have plan assets, the accumulated benefit obligation
and fair value of assets may need to be shown separately (see "Employers With Two or More Plans").
Most of the major credit rating agencies say that their models already adjust the reported balance sheets for the full value of the pension's projected benefit obligation (PBO) or accumulated benefit obligation
(ABO) liability, and either some or all of the value of the retiree medical accumulated postretirement benefit obligation (APBO) liability.
The accumulated post retirement benefit obligation (APBO) is the present value of expected benefits earned to date and, unlike the accumulated benefit obligation
of FAS 87 which is based on current salary levels, the APBO considers future salary increases in measuring obligations of pay-related plans.
With regard to the last item, six Dow companies argue that the accumulated benefit obligation
(ABO) fits better with the definition of the liability than the PBO.
Beginning in 1989, Statement 87 is requiring companies with plans in which the accumulated benefit obligation
(ABO) exceeds the sum of pension assets and unfunded accrued pension cost to show additional balance sheet liabilities to account for the deficit.
In 2003, companies were again required to disclose the aggregate accumulated benefit obligation
, but not to separately state the vested and nonvested benefits.
If a plan has an unfunded accumulated benefit obligation
as of the most recent measurement date, say December 31, 1988, calculating that amount is the first step in computing the pension liability that must be recognized on the employer's balance sheet at March 31, 1989.