Materiality Judgments and Disclosure of Retiree Health Care Costs Under SFAS No. 81

Generally, researchers have difficulty empirically examining materiality judgments because amounts designated as immaterial are not disclosed. However, reporting requirements under SFAS No. 106 provide a unique opportunity to evaluate expense amounts designated immaterial under SFAS No. 81. We use the cumulative effect associated with the adoption of SFAS No. 106 to evaluate prior management materiality judgments. Univariate and logistic regression results suggest that the decision to disclose SFAS No. 81 costs is positively related to our measures of plan materiality. However, our results also suggest that voluntary disclosure factors may have influenced the disclosure decision.