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Three new statements: FASBs 111, 112 and 113.

Three final statements were issued by the Financial Accounting Standards Board.

Statement rescinded. Statement no.111, Rescission of FASB Statement no. 32 and Technical Corrections, rescinds Statement no. 32, Specialized Accounting and Reporting Principles and Practices in AICPA Statements of Position and Guides on Accounting and Auditing Matters, and its related pronouncements.

Statement no. 32 specified which American Institute of CPAs SOPs and guides were preferable for purposes of justifying a change in accounting principle under Accounting Principles Board Opinion no. 20, Accounting Changes.

In January 1992, the AICPA issued Statement on Auditing Standards no. 69, The Meaning of "Present Fairly in Conformity With Generally Accepted Accounting Principles" in the Independent Auditor's Report, which spells out the accounting standards and guidelines that constitute generally accepted accounting principles-- rendering Statement no. 32 and its related pronouncements no longer necessary (see "The AICPA's Role in the Standard-Setting Process," page 67).

Statement no. 111 became effective as of November 30, 1992.

Postemployment benefits. FASB Statement no. 112, Employers' Accounting for Postemployment Benefits, establishes standards for accounting for benefits provided to former or inactive employees and their dependents and beneficiaries before retirement. It is effective for fiscal years beginning after December 15, 1993.

Benefits covered by the statement include salary continuation, severance pay, supplemental unemployment benefits and disability-related benefits.

Statement no. 112 requires employers to recognize a liability for postemployment benefits in accordance with FASB Statement no. 43, Accounting for Compensated Absences, if all of the following conditions are met:

* The obligation is attributable to employees' service already rendered.

* Employees' rights to these benefits accumulate or vest.

* Payment of the benefits is probable.

* The amount of the benefits can be reasonably estimated.

If these conditions are not met, Statement no. 112 requires employers to account for the benefits when it is probable a liability has been incurred and the amount can be reasonably estimated in accordance with FASB Statement no. 5, Accounting for Contingencies.

If the postemployment benefit obligation is not accrued in accordance with either Statements nos. 5 or 43 only because the amount cannot be reasonably estimated, then Statement no. 112 requires employers to disclose that fact in the financial statements.

Reinsurance. Statement no. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts, amends Statement no. 60, Accounting and Reporting by Insurance Enterprises. While Statement no. 60 continued the statutory practice of offsetting reinsurance assets and liabilities, the new statement eliminates the practice--considered inconsistent with the general criteria for offsetting--for general purpose financial statements.

Statement no. 113 requires reinsurance receivables and prepaid reinsurance premiums to be reported as assets. Reinsurance receivables include amounts related to claims incurred but not reported and liabilities for future policy benefits. Estimated reinsurance receivables are to be recognized consistent with the related liabilities.

The statement, effective for fiscal years beginning after December 15, 1992, also establishes the conditions required for a contract to qualify for reinsurance accounting.

Copies of Statements nos. 111, 112 and 113 are available for $10 each and may be ordered from the FASB order department by calling (203) 847-0700, ext. 555.
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Publication:Journal of Accountancy
Date:Feb 1, 1993
Words:510
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