Accounting RequirementsCompanies’ financial statements must meet the many requirements of the Financial Accounting Standards Board (FASB). These accounting requirements are intended to ensure that financial statements are a true picture of the company’s financial status and that outsiders, including potential lenders and investors, can understand and compare financial statements. Under FASB standards, employers must set aside the funds they expect to need for benefits to be paid after retirement, rather than funding those benefits on a pay-as-yougo basis. On financial statements, those funds must appear as future cost obligations. For companies with substantial retirement benefits, reporting those benefits as future cost obligations greatly lowers income each year. Along with rising benefits costs, this reporting requirement has encouraged many companies to scale back benefits to retirees.