Question

The expense for other postretirement benefits, such as health care benefits, dental benefits, and eye care benefits, currently is accounted for on which basis?

1) Accrual basis
2) Cash basis
3) Either a cash basis or an accrual basis; both methods are acceptable
4) By footnote disclosure only

Answer 1

The expense for postretirement benefits other than pensions is accounted for on an accrual basis, recognizing obligations as they are incurred rather than when payments are made.

Step-by-step explanation:

The expense for other postretirement benefits, such as health care benefits, dental benefits, and eye care benefits, is currently accounted for on an accrual basis. Accounting on an accrual basis means that the expenses are recognized when the obligation is incurred, rather than when the payment is made. Unlike the cash basis of accounting, which recognizes expenses when cash is actually paid, the accrual basis matches the expense with the period in which the related services are provided, regardless of when the payments are actually made. This is to ensure that the financial statements reflect the true obligations and financial position of the company at a given point in time.