Dear all: Have a DB problem relating to Cash Flow (LOS Evaluate pension plan footnotye disclosure including CF related information) Knowing that if Economic Pension expense > Empolyee contribution is similar to borrowing. If important to analysis we need to adjust with following steps Step 1) (Economic expense - Employer contributioin) x (1-tax rate) = adjustment step 2) CFO - adjustment Step 3) CFF + adjustment How to make adjustment for Economic Pension expense < Empolyee contribution ??? Anyone help to resolve. Many Many thanks
In that case there is no adjustment to make Eco Pension Expense would be correct on the CFO. Any borrowing Company made would be correct in the CFF. So no adjustments.
my thoughts… When employer contribution > economic pension expense, it would be similar to making a prepayment on a loan (i.e. payment more than the scheduled principal payment). the excess amount reduces the pension obligation. Therefore: 1) CFF - adjustment, meaning an increase in the outflow of cash related to financing activities 2) CFO + adjustment, meaning an increase in the inflow of cash related to operating activities
Many thanks cpk123 reply I may got it, is that due to borrwoing nature should be adjust to CFF and the ER contribution is nothing to do with interest ???