Compensation Glossary

FASB Statement No. 87

Statement 87 governs the ways in which an employer accounts for and reports the costs of pension benefits offered to its employees. It requires that, for accounting purposes, employers use a cost method known as the projected unit credit method in order to establish the net periodic cost of pension benefits offered to employees. Statement 87 further requires employers to recognize a liability if the net periodic cost is higher than employer contributions to the plan and an asset if the net periodic cost is lower.