Question

Which of the following statements regarding postretirement benefits other than pensions is true?

1) A liability for postretirement benefits other than pensions is not required to be reported on the balance sheet.
2) The interest component of the net postretirement benefit expense is based on the accumulated postretirement benefit obligation (APBO).
3) The interest component of the net postretirement benefit expense is based on the expected postretirement benefit obligation (EPBO).
4) An intangible asset for other postemployment benefits (OPEB) is required to be reported on a company's balance sheet.

Answer 1

A liability for postretirement benefits other than pensions is required to be reported on the balance sheet.

Step-by-step explanation:

The correct statement regarding postretirement benefits other than pensions is:

1. A liability for postretirement benefits other than pensions is required to be reported on the balance sheet.

Unlike pension plans, which are funded by the employer, postretirement benefits other than pensions like healthcare and life insurance are usually unfunded and create a liability for the company. This liability needs to be reported on the balance sheet as it represents future payment obligations to retired employees.