Final answer:
The obligation to provide postretirement benefits is not included in financial statements according to U.S. GAAP for several reasons. FASB believes postretirement benefits are voluntary and not considered part of normal compensation. Additionally, including these benefits in financial statements would complicate comparisons between companies and have a negative impact on financial statements.
Step-by-step explanation:
The Financial Accounting Standards Board (FASB) has concluded that the obligation to provide postretirement benefits should not be included in financial statements according to U.S. GAAP for several reasons:
- FASB believes that postretirement benefits are not considered part of the normal compensation for a company's employees. Instead, they are voluntary benefits beyond the employment period.
- Including postretirement benefits in financial statements would make it difficult to compare the financial performance of companies that offer different postretirement benefit plans.
- The cost of providing postretirement benefits is known to exceed the revenues generated by these plans, leading to a negative impact on a company's financial statements.
Therefore, FASB decided that reporting postretirement benefits separately from the financial statements would provide a clearer picture of a company's financial performance and minimize the complexities associated with these benefits.