PDF FAS 106 (as issued) - FASB HomeFASB 106 Definition - BizfluentFAS 106 definition
The Financial Accounting Standards Board has a statement."Employers' Accounting for Postretirement Benefits Other Than Pensions" established standards for employers' treatment of the non-cash retirement benefits they give their employees.The standard example of a benefit.The retiree's health care costs are covered by 106.
FASB Statement no.The effective date was in 1993.Employers used to be able to account for the expenses of nonpension retirement benefits on a pay-as-you-go basis.Giving such benefits looked like a decision that didn't cost the companies anything until years or even decades after it was made.
For instance, the costs of the eventual benefits are charged against the income of employees when they start work.
There are consequences of Statement no.Those statements were mirrored by 106."Employers' Accounting for Pensions."The "discount rate" used to estimate costs as they accrue is based on the market rate of long-term interest.
Statement no. was on the other hand.The accountants had to estimate future increases in health care costs.This was a new challenge for issuing companies and their accountants, and some of them were not happy about it.