Postretirement benefits other than pensions : recommendations based on a study of relevant standards, conceptual frameworks and current trends

Bibliography: leaves 154-161.The FASB began work in the area of postretirement benefits other than pensions (hereafter OPEB) in the early 1980's. It was to be a long, involved process, culminating in the issue of SF AS 106 in 1990. It was commented at the time that "the proposed standard on non-pension postretirement benefits has been argued to be the most significant accounting change since the adoption of depreciation and the total impact of the standard on corporate profits has been estimated at between $200 billion and a trillion dollars" (Espahbodi et al, 1991 , pp 325). It was SFAS 106 and the well-documented effects thereof that heralded the development of other international accounting standards dealing with OPEB. There is currently little guidance in South Africa as to how OPEB should be both accounted for and disclosed in financial statements. Although AC 305 has been issued, this is merely a guideline and compliance therewith is not compulsory. There is currently some confusion as to whether AC 116, dealing with pensions, applies to other postretirement benefits. In light of this, this thesis aimed to propose an acceptable method of accounting for OPEB in South Africa bearing in mind the possible reactions of management to the disclosure of an OPEB liability and the needs of users of financial statements, who in understanding the complex issues surrounding the provision of postretirement benefits will need extensive disclosures. The TASC's harmonisation process also has to be considered as a South African pronouncement should be consistent with any standards issued by the TASC. In order to achieve this objective, a literature review was conducted on the conceptual frameworks that have been issued by the FASB, TASC, TCAEW, CTCA and the AARF. This was done so as to ensure that OPEB do in fact meet the definitions of liabilities and the recognition criteria as contained in the various frameworks. The exposure drafts and accounting standard issued by these accounting bodies were then considered so as to determine whether they were in conformity with the conceptual frameworks upon which they are based and to highlight any differences between the accounting treatments and disclosures in the various countries