This research provides an analytical critique of State ment of Financial Accounting Standards No. 87: Employers' Accounting for Pensions (Financial Accounting Standards Board, 1985), hereinafter referred to as FAS87. The essence of the Statement involves the application of accrual accounting principles to pension fund accounting by employers, with a special emphasis on the single employer defined benefit plan (Financial Accounting Standards Board, 1985).
In this research, the issues involved in pension fund accounting are considered, together with the provisions of FAS87 designed to address those issues. FAS87 is also assessed within the contexts of Statement of Financial Accounting Con cepts No. 1: Objectives of Financial Reporting by Business Enterprises (Financial Accounting Standards Board, 1978), Statement of Financial Accounting Concepts No. 2: QualitativeCharacteristics of Accounting Information (Financial Accounting Standards Board, 1980), and Statement of Financial Accounting Concepts No. 6: Elements of Financial Statements (Financial Accounting Standards Board, 1985), hereinafter referred to as CON1, CON2, and CON6, respectively. Finally, the researcher's opinion of FAS87 is presented, with respect to validity and conformity to good accounting practice.
ISSUES INVOLVED IN PENSION FUND ACCOUNTING, AND FAS87
There are two general types of pension plans. The first requires a stipulated contribution (by an employer, or by a combination of employer and employees) to a pension plan. Pay outs from such plans are largely determined by the value of the fund (or the value of an employee's share of the fund). This type of pension plan is referred to as a defined contribution plan (Winklevoss, McGill, Allison, and Neff, 1984.
The second general pension plan type stipulates the types and amounts of benefits which will be paid upon retirement. Benefit levels are not contingent (directly) on the asset value of the pensi...