hi guys,
_when we adjust GAAP-reported income by adding back the full pension expense and only deduct current service cost, where do the amortizations of prior service cost and actuarial G/L go ?
The curriculum says the adjustment ignores these amortization, so ? I’m in the dark.
_Also, when adjusting CASH FLOWS for the excess/lack of contribution compared to pension cost, why do we need to account the amount AFTER tax ?
many thanks for your time.
The Elan guide states: By adding back the entire amount of pension costs to operating income and substracting service costs you effectively exclude: amortization of past costs, amortization of actuarial gains/losses, interest expense, and return on plan assets from operating income. IMHO Employee Compensation is very badly written and confusing in the CFA curriculum. Elan Guides explanation is a bit more detailed so less difficult to understand but still not clear.