Historical Background Of The United States

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HISTORICAL BACKGROUND From 1938 to 1959, on the onset of pensions’ rise in popularity, the AICPA’s Committee on Accounting Procedure (CAP) set U.S. Accounting Research Bulletins (ARB) as the U.S.’s first standard setter. Examining the accounting for defined benefit pension costs, , accounting for defined benefit pensions was not uniform as companies were able to set their own methodologies for much of this time. In 1948, the defined benefit plan was first instituted in the United States, which was a promise to provide retirement benefit to veterans that served the revolutionary war by the government, thus it became popular with other companies to attract employees. The CAP issued ARB No. 36 “Pension Plans - Accounting for Annuity Costs…show more content…
This defined expenses recognized on income statements were a function of an employer’s funding policy, not their economic cost. Currently, defined contribution plans have gained more popularity over the last few years because companies save more money due to the addition of the employee’s contribution. Defined benefit plans are more complex than defined contribution plan’s way of estimating the budget of liabilities. The off-balance sheet provision that is used raises issues that corrupt the financial statements and distort the financial condition. It is easier for companies to have a third party to consult and take care of investments and complexities associated with investing plans. The last reason for its gain in popularity is that the size of the defined benefit plan assets requires more attention due to the large size in which requires more focus time than to have defined contributions where employers have more time on core business endeavors than retirement plan administration (Churyk et al 90). Today, the governing standard regarding the accounting for pensions in the United States is SFAS 87, “Employers’ Accounting for Pensions” that superseded SFAS 36 and its intended interpretations and amendments, which is found in section 715-20 of the Codification (Compensation – Retirement Benefits – Defined Benefit Plans) in US GAAP, and a corresponding standard is found in IAS 19 of IFRS. (Churyk et al 103). RECOGNITION AND MEASUREMENT
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