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The negative effect of an accounting standard on employee welfare The case of McDonnell Douglas Corporation and FASB 106

The negative effect of an accounting standard on employee welfare The case of McDonnell Douglas... Investigates the negative effect on employee welfare caused by economic decisions taken by corporate managements which they attribute to the adoption of an accounting standard, focusing on the case of McDonnell Douglas Corporation, which ended health‐care benefits for non‐union employees as a result of adopting the Financial Accounting Standards Board′s Statement 106 (FASB 106). It is estimated that the adoption of FASB 106 caused $148 billion in charges to earnings to be recorded by companies in the Standard & Poor′s 500 Index. Despite the large negative effect on earnings, FASB 106 had little or no impact on the economic condition of the affected firms. Nevertheless, managements have taken economic actions that have negatively affected employee welfare, and these actions have been attributed to FASB 106. Some of the hardest hit are employees at older industrial companies with mature workforces hired during the 1950s and 1960s. Some companies ended retirement health plans abruptly, while others required workers and retirees to pay more towards insurance premiums, or prevented new hires from receiving retirement health coverage. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting Auditing & Accountability Journal Emerald Publishing

The negative effect of an accounting standard on employee welfare The case of McDonnell Douglas Corporation and FASB 106

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References (23)

Publisher
Emerald Publishing
Copyright
Copyright © 1995 MCB UP Ltd. All rights reserved.
ISSN
0951-3574
DOI
10.1108/09513579510094679
Publisher site
See Article on Publisher Site

Abstract

Investigates the negative effect on employee welfare caused by economic decisions taken by corporate managements which they attribute to the adoption of an accounting standard, focusing on the case of McDonnell Douglas Corporation, which ended health‐care benefits for non‐union employees as a result of adopting the Financial Accounting Standards Board′s Statement 106 (FASB 106). It is estimated that the adoption of FASB 106 caused $148 billion in charges to earnings to be recorded by companies in the Standard & Poor′s 500 Index. Despite the large negative effect on earnings, FASB 106 had little or no impact on the economic condition of the affected firms. Nevertheless, managements have taken economic actions that have negatively affected employee welfare, and these actions have been attributed to FASB 106. Some of the hardest hit are employees at older industrial companies with mature workforces hired during the 1950s and 1960s. Some companies ended retirement health plans abruptly, while others required workers and retirees to pay more towards insurance premiums, or prevented new hires from receiving retirement health coverage.

Journal

Accounting Auditing & Accountability JournalEmerald Publishing

Published: Aug 1, 1995

Keywords: Accounting standards; Case studies; Employees; Ethics; USA; Welfare

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