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Pension contribution AFTER TAX adjustment in cash flow?

Excess Company’s Contribution vs. Total Pension Costs on an after-tax basis is adjusted in cashflow statement by deducting the same from financing cashflows since it is analogous to paying debt early. Yes makes sense but question is why on after tax basis?


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I didn’t find a satisfactory answer to this either. But then again, it’s not too hard to remember, especially if they give you the tax rate in the question.

You got a tax benefit in current CFO when you made the contribution, so when you reverse it and apply to principle reduction (outflow of CFF) you could only take out the after tax flow.

This link cpk123 explains it in more detail:

The company gets a tax benefit from contributions to the pension plan.  Why would you expect the adjustment to be before taxes?

Simplify the complicated side; don't complify the simplicated side.

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