Describe three differences between the accounting for pensions relative to the accounting for postretirement benefits other than pensions.
What will be an ideal response?
The interest cost for pension plans is a function of the projected benefit obligation; whereas the interest cost for other postretirement benefits is a function of the accumulated postretirement benefit obligation.
The pension asset or liability to be reported on the balance sheet is the difference between the projected benefit obligation and the fair value of plan assets; the asset or liability pertaining to postretirement benefits other than pension plans to be reported on the balance sheet is the difference between the accumulated postretirement benefit obligation and the fair value of plan assets.
Current reporting standards require disclosures for postretirement benefit plans other than pensions that differ from the required disclosures for pensions.
Pension funding is required and is tax-deductible, whereas the funding of postretirement healthcare benefits is not required and is not tax-deductible.
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