charged to profit and loss was that funding levels for any given reporting period are affected by a variety of external factors, in addition to accrued pension costs. The contention was that cash flow was not necessarily a valid reflection of accrued costs.
With respect to the incorporation of realistic assumptions into pension accounting procedures, the central problem area involved the basis for the projection of future compensation levels for employees. Most employers opted for a conservative estimate approach, in which management relied on actuarial assumptions for long-term income projections. Some members of the accounting profession argued that the conservative estimate approach did not provide realistic pension costs to profit and loss for specific reporting periods. These individuals contended that a best estimate approach should be employed, in which management would provide best estimates with respect to assumptions concerning (a) future salaries, (b) mortality rates, (c) employee mi
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