The trillions the government doesn’t account for

By Bryan R. Lawrence

 

Accounting standards may seem like a sleep-inducing subject to many people. But when retirement promises are improperly accounted for, companies and governments can go bankrupt, and hardworking Americans who have relied on the promises can suffer.

General Motors made its first retirement promises to workers in 1950. Under the accounting rules of the time, GM did not have to recognize the current cost of these future promises, as they were considered immaterial to the company’s operations.

Forty-two years later, Americans’ longer life spans and increasingly expensive health care had dramatically increased the cost. The Financial Accounting Standards Board, a private organization given responsibility by the U.S. government for setting private-sector accounting rules, decided that corporate retirement promises had become material, and it required GM and other companies to begin recognizing their current cost.

Read more: http://www.washingtonpost.com/opinions/the-trillions-the-government-doesnt-account-for/2012/02/17/gIQABgdZlR_story.html?wpisrc=nl_opinions