A supplier of electrical parts and motors company with annual sales of $14 million and employs a staff of 80. Company enters an agreement with 2 individuals ,fiscal year 2016, Bostic-age 55, and Wilson age 56, as a management security program to provide postretirement benefits to Bostic and Wilson of $60,000 per employee, per year for an eight-year period, and payable in semiannual installments of $30,000. The agreement provides that payments will be made if Bostic and Wilson remain in the employment of Electric Company, Inc. until their normal retirement date (on attaining the age of 65) or on their actual date of retirement, if later. If either employee dies after payments commence, the company is required to make the remaining payments to the employee's beneficiary. If either employee dies while in the employment of the company but before retirement, the company is required to pay to the employee's beneficiary a $60,000 lump sum. The agreement is neither funded nor guaranteed and does not preclude the company from terminating either employee. Although the plan is unfunded, the company has purchased two whole life insurance policies that would provide for the funding of the agreement if either or both of the employees become vested in the benefits.

Question 1 ) Should generally accepted accounting principles do not require the recognition of liabilities for these agreements as of September 30, 2016, OR as of September 30, liabilities of $960,000 for the agreement should be recognized ? What arguments in support of and against liability recognition ?

Question 2 ) What recommendation for agreement should be accounted for. Include in your discussion what year(s) the effects of the agreement (including specific dollar amounts) should be reported in the company's balance sheet and income statement. Identify any accounts to be reported in the financial statements.