An Analysis in the Statement of Financial Accounting Standards

This type of bounty figure is referred to as a defined contribution excogitate (Winklevoss, McGill, Allison & Neff, 1984).

The morsel general pension object type stipulates the types and amounts of benefits which will be paid upon retirement. Benefit levels atomic number 18 zero(prenominal) contingent (directly) on the asset value of the pension fund at any given point in time. This type of pension plan is referred to as a defined benefit plan (Winklevoss, McGill, Allison & Neff, 1984).

fiscal write up practices with gaze to employer administered pension plans were established in the fall in States in the 1960s. Employers are required to administer employee pension pecuniary resource by selecting an accounting basis which permits the firm to: (a) recognize pension expense in the period in which employees render servicing; (b) leave alone for the accrual of pension costs over the operative lives of employees; (c) apply accounting procedures consistently; and (e) incorporate realistic assumptions into the accounting procedures.

The requirements stated above apply to all employer administered pension plans. Problems arose, however, with respect to defined benefit plans (Drummond, 1986). Most employers opted for a procedure whereby the yearly pension plan cost charged to profit and blemish was equal to the annual funding payment for the pension plan (Buchanan, 1986). Funding payments were based on actuarial projections, and they appeared to most firms to provide an appropriate basis for pen

From its inception, the FASB has operated on what has been described as a problem-by-problem approach. The development and issuance of pecuniary accounting concepts is an attempt by the board to move off from the problem-by-problem approach. Financial accounting concepts, the first of which was issued in 1978, are think to set forth the fundamental objectives and concepts which will be utilise by the board in the development of future monetary accounting standards. Over time, the complete set of financial accounting concepts is intended to provide a cohesive, inter repaird body of surmisal and a conceptual framework, to serve as tools for solving exist and emerging problems in a sound and consistent manner.

expert bulletins issued by the FASB provide guidelines for the implementation in practice of FASB standards and interpretations (FASB, 1984). technical foul bulletins are also used to provide continuing direction with respect to financial accounting and inform problems.

The major line of business against the use of funding payments as a basis for find out pension costs to be charged to profit and going away was that funding levels for any given reporting period are affected by a variety of external factors, in addition to increase pension costs. The contention was that cash fall was not necessarily a valid reflection of accrued costs.

Financial Accounting Standards Board. (1980). Statement of financial accounting concepts no. 2: Qualitative characteristics of accounting information. Stamford, CT: Author.

In the printing of the researcher, FAS87 represents a significant improvement in financial reporting practices for pension funds over the earlier requirements. The requirement to relate obligations to specific time periods is particularly significant, and the transferability of pension benefits from organization-to-organization enhances the need for the improve reporting provided for in FAS87.

Financial Accounting Standards Board. (1984).
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