concerning employee benefit plans are SFAS 87 and 106. These statements improve financial statements' comparability, generally because they reduce the flexibility allowed in determining periodic pension and benefit expense. SFAS 106 also requires that employee benefit costs and liabilities be recognized on an accrual basis as services are rendered. The provisions of these accounting rules affect three areas of financial reporting: income statement; balance sheet; footnote disclosure.
According to SFAS 87, periodic pension expense has six elements: service cost, interest cost, amortization of unrecognized gains or losses, amortization of prior service cost, amortization of transition cost and expected return on plan assets. Existing accounting rules require that when cash payments to the pension fund exceed reported expense, the difference is recognized as an asset. Conversely, when pension expense exceeds cash payments, the difference is reported as a liability. In addition to this liability, companies may be required to recognize an additional minimum lia
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