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representing its employees that petitioner prefunded a reserve
within the VEBA Trust to accumulate assets for PRMB's for
employees.
Petitioner engaged the accounting firm of Touche Ross & Co.
(Touche Ross) to audit4 the VEBA Trust's financial statements as
of December 31, 1986, and November 30, 1987. Petitioner informed
Touche Ross of the liabilities of the VEBA Trust. Although
petitioner did disclose to Touche Ross that there existed
liabilities for unrevealed claims for medical, dental, short- and
long-term disabilities, and associated administrative costs,
petitioner did not disclose any "liabilities" of the VEBA Trust
for PRMB's and did not disclose that any portion of the
contributions made was for the purpose of funding a reserve.
Consequently, the VEBA Trust's financial statements disclose
neither a reserve nor a liability for a reserve for PRMB's.
Financial Accounting Standards Board (FASB) Statement No.
81, entitled "Disclosure of Post Retirement Health Care and Life
Insurance Benefits" (FASB 81), was in effect during petitioner's
1986 year. FASB section 81.06 provides that employers, at a
minimum, must disclose (1) a description of the benefits provided
and the employee groups covered; (2) a description of the
accounting and funding policies followed for those benefits; and
4 Touche Ross's audit was limited, and it did not express an
opinion as to certain elements of the financial statements.
Those areas are not relevant to the instant case.
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