Question

The FASB ASC provides guidance for accounting for the difference between net periodic pension cost and amounts of pension cost considered for rate making purposes as an asset or a liability created by the actions of the regulator. Find, cite, and copy the FASB ASC paragraphs that discuss this issue.

Answer 1

Answer:-

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930-715

05-1     This Subtopic addresses the accounting and reporting for postretirement health benefits for entities in the coal industry affected by the Coal Industry Retiree Health Benefit Act of 1992.

05-2     Current and projected operating deficits of certain benefit trusts established by the United Mine Workers of America and the Bituminous Coal Operators' Association, Inc. prompted the Coal Industry Retiree Health Benefit Act of 1992 (the Act). The Act creates a new multiemployer benefit plan called the United Mine Workers of America Combined Benefit Fund (the Combined Fund), which will provide medical and death benefits to all beneficiaries of certain earlier trusts who were actually receiving benefits as of July 20, 1992. In 1993, the Combined Fund began paying those beneficiaries their medical and death benefits. The Act provides for the assignment of beneficiaries to former employers and the allocation of any unassigned beneficiaries (referred to as orphans) to entities using a formula included in the legislation. The Act requires that responsibility for funding those payments be assigned to entities (or persons related to the entities) that had been signatories to a coal wage agreement. Under the act an entity's annual cost of benefits is based on the number of beneficiaries assigned to it plus a percentage of the cost of unassigned beneficiaries, which is a function of the number of orphans times the per-beneficiary premium.

930-715-15 Scope and Scope Exceptions

General

> Overall Guidance

15-1     This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 930-10-15, with specific entity qualifications noted below.

> Entities

15-2     This Subtopic only applies to entities with operations in the coal industry with a multiemployer pension obligation.

930-715-25 Recognition

General

25-1     Entities that currently have operations in the coal industry shall account for their obligation under the Act (as defined in Section 930-715-05) either as participation in a multiemployer plan or a liability imposed by the Act. Entities that currently have operations in the coal industry that decide to account for their obligation as a liability and entities that no longer have operations in the coal industry shall account for their entire obligation under the Act as a loss in accordance with Subtopic 450-20.

930-715-45 Other Presentation Matters

General

45-1     If an entity accounts for its obligation under the Act as a loss (see paragraph 930-715-25 1) in accordance with Subtopic 450-20, the estimated loss should be reported as an extraordinary item.

930-715-50 Disclosure

General

50-1     An entity shall disclose the impact of the Act, including the estimated amount of its total obligation and the method of accounting adopted.

05-1     This Subtopic provides guidance for compensation related to pension costs and other postretirement benefit costs for entities with regulated operations.

> Other Postretirement Benefit Cost

05-3     This Subtopic provides guidance for the difference between net periodic postretirement benefit cost as defined in Subtopic 715-60 and amounts of postretirement benefit cost considered for rate-making purposes as an asset or a liability created by the actions of the regulator.

Criteria for Recognizing Regulatory Assets for Postretirement Benefit Differences

25-3     For purposes of this Subtopic, other postretirement benefits refer to all forms of benefits, other than pensions, provided by an employer to retirees.

25-4     For continuing postretirement benefit plans, a regulatory asset related to Subtopic 715-60 costs shall not be recorded if the regulator continues to include other postretirement benefit costs in rates on a pay-as-you-go basis. The application of this Topic requires that a rate-regulated entity's rates be designed to recover the specific entity's costs of providing the regulated service or product. Accordingly, an entity's cost of providing a regulated service or product includes the costs provided for in Subtopic 715-60.

25-5     For a continuing postretirement benefit plan a rate-regulated entity shall recognize a regulatory asset for the difference between Subtopic 715-60 costs and other postretirement benefit costs included in the entity's rates if the entity does both of the following:

a.         Determines that it is probable that future revenue in an amount at least equal to the deferred cost (regulatory asset) will be recovered in rates.

b.         Meets all of the following criteria:

1.         The rate-regulated entity's regulator has issued a rate order or issued a policy statement or a generic order applicable to entities within the regulator's jurisdiction that allows both for the deferral of Subtopic 715-60 costs and for the subsequent inclusion of those deferred costs in the entity's rates.

2.         The annual Subtopic 715-60 costs (including amortization of the transition obligation) will be included in rates within approximately five years from the date of adoption of that Subtopic. The change to full accrual accounting may take place in steps, but the period for deferring additional amounts shall not exceed approximately five years.

3.         The combined deferral-recovery period authorized by the regulator for the regulatory asset shall not exceed approximately 20 years from the date of adoption of Subtopic 715-60. To the extent that the regulator imposes a deferral-recovery period for those costs provided for in Subtopic 715-60 greater than approximately 20 years, any proportionate amount of such costs not recoverable within approximately 20 years shall not be recognized as a regulatory asset.

4.         The percentage increase in rates scheduled under the regulatory recovery plan for each future year shall be no greater than the percentage increase in rates scheduled under the plan for each immediately preceding year. This criterion is similar to that required for phase-in plans in paragraph 980-340-25-3(d). Recovery of the regulatory asset in rates on a straight-line basis would meet this criterion.

25-6     This guidance applies to rate-regulated entities that elect to immediately recognize their postretirement benefit transition obligation under Subtopic 715-60 as well as those entities that elect to delay the recognition of and amortize their postretirement benefit transition obligation in accordance with that Subtopic.

25-7     For discontinued plans, a regulatory asset related to Subtopic 715-60 costs shall be recorded if it is probable that future revenue in an amount at least equal to any deferred that Subtopic costs will be recovered in rates within approximately 20 years following the adoption of that Subtopic. Rate recovery during that period may continue on a pay-as-you-go basis. For purposes of this guidance, a discontinued plan is one that results in employees not earning additional benefits for future service (that is, one that has no current service costs).