Reporting a Liability, with Discussion (Supplement A)
The annual report for American Airlines contained the following information:
In addition to pension benefits, other postretirement benefits, including certain health care and life insurance benefits (which provide secondary coverage to Medicare), are provided to retired employees. The amount of health care benefits is limited to lifetime maximums as outlined in the plan. Substantially all regular employees of American and employees of certain other subsidiaries may become eligible for these benefits if they satisfy eligibility requirements during their working lives.
Required:
Should American report a liability for these benefits on its balance sheet? Explain.
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