Companies have to accrue the cost and record the present obligation for post-employment benefits. In the past, the cost of these benefits was simply recorded as it was incurred, which was known as the pay-as-you-go approach.
Required:
a. As a manager, explain why you would prefer to continue to use the pay-as-you-go method.
b. What accounting concepts support the change in accounting method from the pay-as-you-go approach to recognizing the future obligation before the employees retire?