Rash Words, Insincere Assurances, Uncertain Promises: Verifying Employers' Intentions in Labor Contracts



Date of this version


Document Type



Retirement Benefits, Employer Promises, ERISA, SFAS 106, Habermas


This paper critiques SFAS 106 and the accounting and legal institutions in which it is embedded for not informing labor of the nature, extent, and uncertainty of employers' retirement health care promises in a timely and reliable manner. The critique consists of three parts. First, a review of ERISA provisions and influential court cases refutes the SFAS 106 extra-legal accounting basis which requires the accrual of liabilities for contingent commitments that are not legally binding and not nearly as costly to amend or terminate as SFAS 106 implies. Second, a speech act analysis of employer -employee communications and documented examples of employer deception refute the SFAS 106 presumption that postretirement benefit plans are “mutually understood” by both employers and employees. Third, the SFAS 106 recognition and disclosure requirements (and, more generally, financial reporting boilerplate) obscure rather than reveal the contingent nature of employers' non-legally binding obligations. To better address labor's information needs, the paper proposes an auditor's report to verify whether an employer has expressed legally binding intentions to continue funding a health plan. Some practical implementation difficulties are also considered, including accountants' lack of moral courage to intervene on behalf of labor. Finally, the paper discusses some broader implications of the critique.

Published in

Critical Perspectives on Accounting

Citation/Other Information


Critical Perspectives on Accounting, 2002, 13, pp. 63-88