This section covers various technical dimensions of healthcare plan design, including accounting, tax, legal, financial, and auditing.
The Standards Framework
In the United States, the accounting of health and welfare programs is influenced by two significant guiding principles, as codified in the U.S.: generally accepted accounting principles (GAAP), Financial Accounting Standards Board (FASB), and the Employee Retirement Security Act (ERISA). Internationally, this principle is the International Financial Reporting Standards (IFRS).
In the U.S. GAAP, health/welfare plan accounting is codified in FASB Accounting Standards Codification (ASC) Regulation 965, and IFRS codification is in IAS 19.
These rules, regulations, and principles (both under the U.S. GAAP and the IFRS, FAS 965, and IAS, 19, respectively) guide the discussion throughout this section. You will learn about the salient elements of accounting requirements under both relevant codes. For a detailed analysis and understanding of these codes, review these websites:
Companies in the United States have been analyzing the differences between the IFRS and the U.S. GAAP in anticipation of a convergence of standards. All parties are waiting to see when an imposition will be made by rule-making bodies requiring U.S. companies to adopt IFRS standards.
Analyzing, interpreting, and understanding FASB standards, with respect to benefits accounting, is a worthwhile exercise. This same analysis must also be made with regard to IFRS standards, due to the potential for convergence in the near future.
Understanding the accounting principles under both standards will assist in the execution of this convergence if and when it is needed. IFRS regulations pertaining to health and welfare are also discussed later in this chapter.
The current discussion is based on a direct analysis and discussion of the standards.4
4 FASB 965 Plan Accounting—Health and Welfare Plans (based on an analysis of FASB 965).
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