Many utilities and power companies have subsidiaries with stand-alone reporting requirements that participate in a pension plan sponsored by an affiliate entity (e.g., parent company). When an entity participates in a pension plan sponsored by an affiliated entity, the accounting in stand-alone financial statements of that entity should generally follow the “multiemployer” guidance in ASC 715, Compensation—Retirement Benefits.

The multiemployer guidance differs significantly from the traditional “single employer” accounting guidance in ASC 715. Under multiemployer accounting, a subsidiary would typically record expense based on its required contribution to the plan for the period, with recognition of a liability only for contributions that remain unpaid as of period end. (Note: In affiliated entity situations, other expense allocation approaches may also be appropriate, such as an allocation of parent expense based on headcount, total salaries, etc.) See Question UP 17-11 for consideration of whether a parent company can record an offsetting regulatory asset if the ASC 715 liability is not recorded in a regulated subsidiary’s separate financial statements.

A subsidiary participating in its parent’s single employer plan should disclose the amount of contributions to the plan and the name of the plan. Unless a subsidiary is a sponsor of its own pension plan, the subsidiary would not be required to include the full disclosures required for its parent (the plan sponsor) by ASC 715-20-50.