Should employers report unfunded actuarial accrued liability for pension benefits in their statement of position?

Employers are not required to report unfunded actuarial accrued liabilities (UAAL) for pension benefits in their statement of position due to specific accounting standards. The Generally Accepted Accounting Principles (GAAP) and the guidelines from the Governmental Accounting Standards Board (GASB) dictate that while the funded status of pension plans should be disclosed, the unfunded liabilities themselves do not need to be directly reported as liabilities on the statement of position. Instead, these liabilities are typically presented in the notes to the financial statements. This approach helps maintain clarity in the financial statements while still providing sufficient information regarding the pension obligations to stakeholders.

While some may argue that reporting partial or conditional UAAL could provide a clearer picture of a company’s liabilities, the current accounting framework prioritizes a standardized presentation that allows for comparability without overburdening the statement of position with uncertain future liabilities.