Adjusting Cash Flow - Contributions to Pension Plan

CFA Level II FRA
#1

Hi Folks,

“Excess contribution (over total pension cost) to the pension plan by employer is similar to repayment of borrowing and would increase cash outflow from financing activities and increase cash inflow from operating activities by the same amount.”

I can understand that excess contribution will result in outflow from financing activities as it is similar to repayment of debt but how does it increase the cash inflow from operating activities ?

#2

Could anyone help me out with this ?

#3

The contributions are actual operating cash flows (they reduce CFO). You need to adjust by adding them back before reducing CFI. If not you are double counting the contribution.