On Friday, March 10, 2017, the Financial Accounting Standards Board issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, an amendment of the FASB Accounting Standards Codification. The amendments are effective for public entities with annual periods beginning after December 15, 2017, and will be testable on the CPA Exam on January 1, 2018. A more in-depth reminder notice will be sent to you shortly before this material becomes testable.
The purpose of ASU No. 2017-07 is to improve the consistency, transparency, and usefulness of financial information for users. Defined benefit pension cost and postretirement benefit cost comprise several of the components of the cost of benefits provided to employees. Under current GAAP, those components are aggregated for reporting in the financial statements; Topic 715 does not prescribe where the amount of net benefit cost should be presented in the income statement and does not require entities to disclose by line item the amount of net benefit cost that is included in the income statement or capitalized in assets.
These amendments (1) require an employer to disaggregate the service cost component from the other components of net benefit cost, (2) provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement, and (3) allow only the service cost component of net benefit cost to be eligible for capitalization, under the appropriate circumstances.
It’s important to be aware of changes in authoritative literature which could impact how you answer the questions on the CPA Exam within that topic. Since exam material could conceivably change from one exam testing window to another, turn to Surgent for the latest updates. Our CPA Review team stays informed of all authoritative and pronouncement changes and ensures you’ll receive the news as soon as we do!
Susan J. Cox, M.Acc., CPA is a Senior Technical Editor for Surgent CPA Review. Susan received her graduate and undergraduate degrees from Florida State University. Prior to joining Surgent, Susan worked as a technical editor for Thomson Reuters, an accounting instructor for the University of South Florida, a senior internal auditor for GTE, and an experienced senior auditor for Arthur Andersen & Co.