Accounting for Pensions and other Post-Retirement Benefits
Compare and contrast the early historical accounting for Postretirement Health Care and Life Insurance Benefits with the guidance / rules in place today.
Postretirement health care benefits can be defined as a form of gain an employee receives after retiring from a given job which are provided by an employer for certain health care services or coverage of defined health care costs, that may include hospital and medical coverage, dental benefits, and eye care.( Allen, S., & Clark, R. 2013). Life Insurance Benefits on the other hand is a contractual agreement between an employer and an employee as a benefit to the life coverage (Life insurance its principles, operations and benefits.2013). Companies can provide life insurance benefits to an employee when they are still active employees, while postretirement life insurance is restricted to the time the employee is retired. The company provides benefits only when one has retired from a given job and will cover the employee for some years after retirement. When one dies before attaining the age of retiring then they shall not be liable to any form of Postretirement benefit but they will have enjoyed health life insurance benefits that cover even their deaths( Allen, S., & Clark, R. 2013).
Initially, accounting standards did not require any employer to have to report on the postretirement benefit plan’s financial position as either over or underfunded. It also did not allow any employer to earn any form of comprehensive income (Hertz, S. 2011). In a two-phase project undertaken by FASB and the IASB in 2005, it was determined that companies inconsistently disclosed funding information on OPBPs. This changed when FSAS No. 81 required disclosures concerning Postretirement Health Care and Life Insurance Benefits, which includes the following:
1. A description of the benefits provided and the group the benefits cover,
2. A description of...