GASB 45 requires that the expected future costs of retiree health costs be recognized in the current period. Prior to this, governments used a pay-as-you-go plan in which only the current year’s...

GASB 45 requires that the expected future costs of retiree health costs be recognized in the current period. Prior to this, governments used a pay-as-you-go plan in which only the current year’s actual payments affected the financial statements. Suppose you are working for a government prior to the issuance of GASB 45. As part of the collective bargaining agreement, the government offers employees increased health benefits.1. Prior to the issuance of GASB 45, what would be the impact on the government’s financial statements?2. Under GASB 45, what are the financial statement implications?3. Why might the current governmental leaders agree to offer such a benefit?4. What are the ethical issues involved in this decision?View Solution:

GASB 45 requires that the expected future costs of retiree