How can I estimate the potential effect that the loss of the deduction of expenses related to the RDS subsidy will have on my companys financial statements?
A405. Currently, as a tax-paying employer, the FAS106 liability on your books for retiree medical benefits may be partially offset by a FAS109 deferred tax asset, recognizing the tax benefits that would be available on future deductions for these costs. Your actuary should be currently providing you with a measure of the APBO (Accumulated Postretirement Benefit Obligation) both with and without RDS. You can estimate the long-term (balance sheet) impact by multiplying the difference in these two amounts by your company’s marginal tax rate reflected in any deferred tax asset that is included in the balance sheet. The estimate may be a bit closer if you subtract out of that amount, the 2010, 2011 and 2012 projected RDS amounts shown on the most recent disclosure. Your actuary can give you an exact number measured as of March 2010. It appears that the accountants are requiring the reduction in the deferred tax asset to be a one-time charge to earnings in the period that the legislation is