Employer Contribution=$340 Economic Pension Expense=$940 Tax=40% According to Schweser $360 should be reclassified from cfo to cff (940-340)*(1-0,40). Why do I have to multiply it by (1-Taxes), shouldn’t the whole difference ($600) be reclassified to cff?
when you showed a pension expense (on the CFO) you got a tax benefit because of that… Revenues 2000 Expense 1000 (out of which 940 was pension expense) --------------------------- EBT 1000 Tax 400 ---------------------------- NI 600 ---------------------------- New - 940 - 340 reclassed as a CFF instead of CFO Revenues 2000 Expense 400 ---------------------------- EBT 1600 Tax 640 ---------------------------- NI 960 ---------------------------- CFO changed by 960 - 600 = 360 ==> 600 * .6
ty!