Define Benefit Question (LOS Evaluate pension plan footnotye all, following, important, including

tikfed

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
Anyone help to resolve. Many Many thanks

hoangvu90

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 ????

BelalM

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

Analti_Calte

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.