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ASC 715 does not include special provisions applicable to pension arrangements outside the US. If those arrangements are in substance similar to pension plans in the US, they are subject to the provisions of ASC 715. ASC 715 applies to any arrangement (written or unwritten) that is similar in substance to a pension plan regardless of the form or means of financing. Pension benefits are defined in ASC 715-30-20 as "periodic (usually monthly) payments made pursuant to the terms of the pension plan to a person who has retired from employment or to that person's beneficiary." Thus, for example, if such an arrangement is in substance a pension plan, such as when severance benefits are paid for virtually all terminations, it is subject to the provisions of ASC 715. ASC 715 does not apply to life insurance benefits provided outside a pension plan or to other postretirement health and welfare benefits. However, ASC 715 would apply to death-in-service or disability benefits provided as part of an overall pension plan (regardless of whether such benefits are covered by insurance policies purchased by the entity or pension trust).
The entity's specific pension and severance arrangements at each foreign location should be clearly understood in order to determine the applicability of ASC 715. See PEB 8 for a discussion of postemployment benefits, which may impact the accounting for these severance arrangements.
Some international plans have been designed that contain features of both defined benefit and defined contribution plans. However, the narrow scope of defined contribution plans under ASC 715, which requires individual accounts for each participant, often prevents such plans from qualifying as defined contribution plans, and therefore these plans would be defined benefit plans for US GAAP reporting.
Because many foreign countries have some form of nationalized health insurance, employer promises to provide retiree healthcare coverage may not be as prevalent among non-US entities. In effect, the cost for non-US operations' postretirement health care is often reflected in local taxes or social security contributions.
There may be other situations when non-US arrangements that are similar in substance to OPEB plans offered in the United States exist. Even in countries with nationalized health insurance, the coverage provided by such insurance may be limited. As a result, employers may still have OPEB plans, albeit of a more restricted nature. Experience has shown that the liability that results from even restricted coverage plans can be significant. Such plans are required to be accounted for in accordance with the provisions of ASC 715-60 and the appropriate disclosures made in accordance with ASC 715-60-50.
The applicability of ASC 715-60 to these plans should be determined by the nature of the obligation and the terms and conditions that define the amount of benefit payments, not by the funding mechanism, whether the benefits are payable over more than one period or as a lump-sum, or whether the benefits are required by law or custom.
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