Accounting Research
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Submitted by freefortermpapers on 06/24/2008 03:00 PM
- Category: Business
- Words: 1046
- Pages: 5
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Accounting Research
JOHNSON AND JOHNSON
Traditionally, accounting for post-employment benefits has been an area of much controversy in the accounting world. FASB has issued multiple statements on the subject and likely will continue to amend the statements as time passes.
In March on 1975, FASB issued Statement No. 5, "Accounting for Contingencies." This Statement established standards of financial accounting and reporting for loss contingencies. It required accrual by a charge to income for an estimated loss from a loss contingency if two conditions were met: (1) information was available prior to issuance of the financial statements indicates that it was probable that an asset had been impaired or a liability had been incurred at the date of the financial statements, and (2) the amount of loss can be reasonably estimated.
Then, in November of 1980, FASB issued Statement No.43, "Accounting for Compensated Absences." This statement requires an employee to accrue a liability for employee's rights to receive compensation for future absences when certain conditions are met. One example is that this statement requires a liability to be accrued for vacation benefits that employees have earned but have not yet taken.
Then, in November 1992, FASB issued statement No. 112 which amended Statements No. 5 and 43. Statement No. 112 establishes accounting standards for employers who provide benefits to former or inactive employees after employment but before retirement. This statement required employers to recognize the obligation to provide post employment benefits in accordance with Statement No. 43, if the obligation is attributable to employee's services already rendered, employee's right vest, payment of the benefits is probable, and the amount can be reasonably estimated. If all four of these conditions are not met, employers are required to account for post employment benefits when it becomes probably that a liability has been incurred...
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