a. The book said that the difference between the contributions and the actual expense can be viewed as a reduction in the overall pension obligation similar to an excess principal payment on a loan. Pension contributions are reported as operating activities in the cash flow statement, while principal payments are reported as financig activities. Thus, the adjustment involves INCREASING Operating Cash Flow by 750 and DECREASING Financing Cash Flow by 750.
My question - if there is excess contributions and they say its like making an excess principal payment, wouldn't that DECREASE operating cash flow when you pay the principal and INCREASE financing cash flow?
maybe I am just burned out and missing it....作者: SpyAli 时间: 2011-7-13 16:30
For intensive purposes, the "excess principal payment" has to be taken out of financing cash flow since it is an outflow. However, you can't leave the CF statement like that since it won't equal your beginning and ending balance of cash, so you make an offsetting entry in cash flow from operations.