Page 90 - Group Insurance and Retirement Benefit IC 83 E- Book

(e) Pension and retirement plans—

(1) A brief description of the essential provisions of any employee pension or retirement

plan shall be given.
(2) The estimated annual cost of the plan shall be stated.

(3) If a plan has not been funded or otherwise provided for, the estimated amount that
would be necessary to fund or otherwise provide for the past-service cost of the plan shall

be disclosed.

Since the SEC requires the disclosure of any unfunded prior-service cost in certain
situations, the corporations at the request of their auditors often show this same

information in the footnotes to the annual statement. However, there is no requirement
for such disclosure.

PROBLEM'S WITH PRESENT PRACTICES

Whether or not there is a problem with the present practice of accounting for charges

made for pension plans depends on one's point of view. Many corporations take the
position that the charge for pension expense is a minor item on the income and outgo

statement, and thus simplicity should be overriding. Other corporations feel that
management should have some flexibility to meet changing conditions by varying

contributions- pension-plan charges--from one year to the next. This gives management

the opportunity to level out minor fluctuations in earned income. Others, particularly the
accountants, feel that present practices distort corporate financial statements in that

companies have a choice in the amount to be charged to operations during the year. Thus
a company wanting to show increased earnings may be able to do so by eliminating its

charge to the pension plan entirely for a given year. Alternatively, the companies that

have a particularly good year, but want to carry forward some of its earnings to a later
year, can make a high contribution to the pension fund and thereby increase its current

charges.