Retirement Benefits

Question: Assume that one of the employees for the Michigan Company is currently thirty-four years old and

is entitled to retirement benefits starting at the age of sixty-five. Michigan has promised to continue paying

Don't use plagiarized sources. Get Your Custom Essay on
Retirement Benefits
Just from $13/Page
Order Essay

health care and life insurance premiums for all retirees as long as they live1.For this employee, no postretirement

benefits will be paid for thirty-one years (65 less 34) but then an unknown payment amount will continue for

an unknown period of time. “What Should Decision-makers Know So That Good Decisions Can

Be Made about an Organization?”, the challenge presented to accountants as a result of future uncertainty was

discussed. Probably no better example can be found than postretirement benefits. For example, if this employee

lives to be ninety-four, these insurance payments will continue until sixty years into the future.

The employee is helping the company generate revenues currently so that, once again, the related expense should

be recognized now according to the matching principle. Although this obligation might extend for decades, both

the expense and related liability are recorded when the person is actually working for the company and earning

these benefits.

How is the amount of this obligation possibly determined? An employee might retire at sixty-five and then die

at sixty-six or live to be ninety-nine. Plus, estimating the cost of insurance (especially medical insurance) over

several decades into the future seems to be a virtually impossible challenge. The skyrocketing cost of health care

is difficult to anticipate months in advance, let alone decades. The dollar amount of the company’s obligation

for these future costs appears to be a nebulous figure at best. In this textbook, previous liabilities have been

contractual or at least subject to a reasonable estimation prior to recognition. How is the liability calculated that

will be reported by a company for the postretirement benefits promised to its employees?

Answer: As shown by the Alcoa example, postretirement benefits are estimated and reported according to U.S.

GAAP while employees work. Because of the length of time involved and the large number of variables (some of

which, such as future health care costs, are quite volatile), a precise determination of this liability is impossible.

In fact, it may be the most uncertain number found on any set of financial statements. FASB apparently believes

that reporting a dollar amount for postretirement benefits, despite its inexactness, is more helpful than omitting

the expense and liability entirely. Decision makers need to understand that these reported balances are no more

than approximations.

Academic Heros
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

Our writers are encouraged to read and research widely to have rich information before writing clients’ papers. Therefore, be it high school or PhD level paper, it will always be a well-researched work handled by experts.

Professional and Experienced Academic Writers

For one to become part of our team, thorough interview and vetting is undertaken to make sure their academic level and experience are beyond reproach, hence enabling us give our clients top quality work.

Free Unlimited Revisions

Once you have received your paper and feel that some issues have been missed, just request for revision and it will be done. In addition, you can present your work to the tutor and he/she asks for improvement/changes, we are always ready to assist.

Prompt Delivery and 100% Money-Back-Guarantee

All our papers are sent to the clients before the deadline to allow them time to review the work before presenting to the tutor. If for some reason we feel our writers cannot meet the deadline, we will contact you to ask for more time. If this is not possible, then the paid amount will be refunded.

Original & Confidential

Our writers have been trained to ensure work produced is free of plagiarism. Software to check originality are also applied. Our clients’ information is highly guarded from third parties to ensure confidentiality is maintained.

24/7 Customer Support

Our support team is available 24 hours, 7 days a week. You can reach the team via live chat, email or phone call. You can always get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

You have had a hectic day, and still need to complete your assignment, yet it is late at night. No need to panic. Place your order with us, retire to bed, and once you wake up, the paper will be ready.


Essay Writing Service

It does not matter the urgency of your paper, or the academic level, our team is ready to help you 24/7. Just contact us and all your academic needs will be sorted.


Admission Essays & Business Writing Help

A student is often required to write an admission letter requesting to be admitted in a certain institution. For you to be gain that admission in your dream institution, you must write a convincing letter. You can depend on our team for the best admission letters.


Editing Support

Academic writing is not just about getting information and throwing it all over. Our team will ensure you have a polished paper that is coherent and has a good flow of information. We also ensure the paper follows the correct formatting styles like APA, Harvard, MLA, Chicago/Turabian.


Revision Support

If our writers write a paper but you are not satisfied in one way or another, you can always ask for revision. This is totally free. Our writers and editors will revise your paper untill you are be totally satisfied. We as well offer revision for papers not done by our writers at a small fee.