FAS 106 does not affect the amount of net profit companies list on balance sheets.(Retiree Health-Care Benefits)

Question

Quizplus · Accepted Answer

FAS 106 (Accounting for Postretirement Benefits Other Than Pensions) requires companies to account for the expected cost of providing postretirement benefits (like healthcare) to employees over their period of employment, rather than when the benefits are paid. This can affect a company's reported expenses and liabilities, potentially reducing reported net income, not directly affecting the balance sheet's net profit, as net profit is reported on the income statement. However, the increased expenses due to FAS 106 can indirectly affect the equity section of the balance sheet through retained earnings.

FAS 106 Does Not Affect the Amount of Net Profit