Page 91 - Group Insurance and Retirement Benefit IC 83 E- Book

This, the accountants feel, distorts the true picture of the corporation's cost of the

operation during this year, which should be disclosed to the stockholders and other
interested parties.

Disagreement also exists on what should be disclosed in the annual statement and how it

should be done. No one denies that pertinent information should be made available,
provided further that it is not misleading or likely to be misinterpreted.

ACCRUAL ACCOUNTING
Accrual accounting for the charge to operations for a pension plan means that the

estimated true cost for the pension plan is charged to operations during the year

regardless of the actual contribution made to the pension fund. The proposition is that the
company has this cost during the year and that this cost should be entered on the books.

The accounting profession generally takes this position.
The accountants as independent auditors have the responsibility of satisfying themselves

that the financial statement of a company is a true reflection of its operations and
conditions for the year.

As independent auditors, they have responsibility to the stockholders, to management,

and to the public in general where stock is offered to the public. Thus, to the best of their
ability, they wish to insure that all items in the balance sheet and income and outgo

statements reflect the actual status of the company and its operations during the period
reviewed.

With respect to the financial statement, most accountants feel that the income and outgo
statement and the resulting net earnings for the year are the most important financial

figures. Thus particular emphasis is placed on obtaining the proper entries for this

statement. Under the present cash system of accounting for pension charges, management
has the opportunity of increasing or decreasing earnings by contributing a small or large

amount during the year to the pension fund. It may be within the power of management

to show a favorable earnings history from one year to the next for several years merely by
adjusting the contributions to the pension fund. Also, it may be possible to adjust the