An employer's estimated cost for postretirement benefits for its employees should be

Question

Quizplus · Accepted Answer

The employer's estimated cost for postretirement benefits should be recognized as an expense during the employees' work years, also known as the accrual basis of accounting. This is because the benefits are earned by the employees during their service period and the cost of those benefits should be recognized over the period in which they are earned. Waiting until benefits are paid would not accurately reflect the economic reality of the situation and could result in misleading financial statements.

An Employer's Estimated Cost for Postretirement Benefits for Its Employees