Date of Defense

Winter 4-1-1992



First Advisor

David Rozelle, Accountancy

Second Advisor

Jerry G. Kreuze, Accountancy

Third Advisor

Joel Bowman, Business Information Systems


Users of financial statements need to be aware of the effects and meaning of FAS 106 to make informed financial decisions. Many companies will spend a great amount of time, money and resources to comply with this standard. The charges to income are high, as are the costs to determine the charge. Corporate executives fear the effects of the implementation on their corporation's financial position. This standard does not present any new ideas to the business world, but applies basic accounting theory to a previously untouched topic. Accounting systems are based on the accrual concept. Accrual accounting centers on the idea that revenues and expenses should be recognized at the time incurred. The Financial Accounting Standards Board (FASB) is extending that philosophy to postretirement benefits other than pensions, commonly referred to as OPEBs. Employers' liabilities for OPEBs are not found on their financial statements, which may misrepresent their financial standing and profits. The accrual method will account for costs during the period in which employees' service is provided.Retiree health benefits are the costliest, the most difficult to measure, and are the focus of the FAS 106 controversy. The major question at hand with the recording of OPEBs is: how much do they cost? There is a considerable degree of uncertainty and subjectivity in estimating these costs. But does that degree of uncertainty mean there is no deferred compensation to recognize or should the best estimate of cost be used?

Access Setting

Honors Thesis-Campus Only