Minimum Liability
Concept of the Minimum Liability:
- A company must report a liability for a pension plan’s unfunded accumulated obligation in excess of any accrued or prepaid pension cost reported.
- The FASB did not want to depart dramatically from previous pension reporting.
- The Board did not adopt full-capitalization but compromised by requiring the recognition of a minimum liability when the ABO > fair value of plan assets (to at least recognize the unfunded ABO).