Publication Date


Document Type


First Advisor

Norton, Curt

Degree Name

B.S. (Bachelor of Science)

Legacy Department

Department of Accountancy


Prior to 1990, health care costs were escalating at an annual rate of up to 22%. Due to this increase, the FASB was not satisfied with how businesses were reporting their postretirement expenses and drafted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS 106 required employers to record postretirement expenses under the accrual method, not the cash basis method that the majority of companies were recording. The impact on corporations was immense, with an increase in industry costs estimated from $400 billion to $1 trillion. This paper defines what postretirement expenses are, examines current reporting requirements, analyzes selected company's annual reports for the impact of SFAS 106, and analyzes how companies have reacted to SFAS 106. To accomplish my goals, I researched SFAS 106, analyzed numerous financial reports, and read articles written about the impact about SFAS 106. What I discovered is that health care costs have decreased significantly since the implementation of SFAS 106, as a result of companies understanding the magnitude of their postretirement expenses and attempting to decrease these costs. Most employers have reacted to the increased cost of postretirement benefits in some manner; some corporations have either reduced or eliminated postretirement benefits, some corporations have made employees pay a greater share of their postretirement benefits, and some corporations have funded their postretirement expenses.


36 pages




Northern Illinois University

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