Accounting For OPEBs: Does Better Accounting Serve The Public Interest?

In 1992, the Financial Accounting Standards Board (FASB) issues Employers Accounting for Postretirement Benefits Other Than Pensions (SFAS 106). SFAS 106 requires public companies to account for postretirement benefits other than pensions (e.g., health care) on an accrual basis. While SFAS 106 is good accounting, it provides corporations with an excellent excuse to amend or terminate health care coverage for retirees. This paper discusses the economic and social consequences of SFAS 106 as well as the politics of the accounting standard setting process.