An examination of financial impacts of SFAS No. 106
Abstract
SFAS No. 106 requires companies to accrue the expected cost of OPEB during the years employees provide services to the company. The Statement is based on the assumption that OPEB are a form of deferred compensation and the resulting obligation should be recognized when services are rendered. This article examined some provisions of the Statement and the possible impact on financial statements of affected companies as well as management efforts to control OPEB costs. The results indicate that adoption of SFAS No. 106 has caused companies to report OPEB transition obligations on their balance sheets and to show higher OPEB annual expenses on their income statements. These perceived negative financial impacts of adopting SFAS No. 106 do not appear to have encouraged management to take immediate actions to curtail the promised OPEB. However, in many cases, management is considering implementing changes in plan design such as increasing or imposing retiree contribution levels or retiree deductibles and higher coinsurance levels, reducing benefits and coverage, and changing coordination of benefits with Medicare in attempt to mitigate the possible negative financial impacts of adopting SFAS No. 106. © 1995 Atlantic Economic Society.
Publication Title
International Advances in Economic Research
Recommended Citation
Rezaee, Z., & Hayes, R. (1995). An examination of financial impacts of SFAS No. 106. International Advances in Economic Research, 1 (1), 53-56. https://doi.org/10.1007/BF02295851
