Am I correct in saying that the total Periodic pension cost (Economic, Real) is off the B/S and the I/S and is located in the footnotes of the financial statements?
report… any takers? Just want to make sense out of this last bit of pensions
Total periodic/economic cost is contribution minus change in funded status and is neither on the B/S or the I/S. the B/S only has the funded status and some unamortize stuff in the OCI. The I/S only has the pension expense which is different than the economic periodic cost.
so how would one determine total cash outflow?
when you really think about it the real cash outflow is the employer contribution because even benefit paid are made out the the plan asset.
I thought this was the other way around… oh well -1 to me
In a defined benefit plan all the employee has to do is to pay employee contribution to the plan. The plan then invest the money and pay out benefit to employees…so really all these service cost, interest cost and other crap are just accounting tricks. the only time the company write a check is to make contribution to the plan asset…anyway what do I know I am just a L2 candidate.
That makes sense, I just thought of outflows as leaving the plan, ie only thing that really leaves the plan are benefit payments. I work in pensions and for example well have to liquidate 1mm a month to pay benefits. S2000 to the white courtesy phone?
I wouldn’t be so quick about it. Benefits paid are deducted from both FVPA and PBO. Employer contributions are surely a cash outflow, but it all depends on what “total cash outflow” means. If you mean total operating cash flows, then you have to look at the stuff that goes to P&L as well.
you have to remember tha plan asset does not seat at the company but at the pension manager and is independently manage. When you even look at the pension expense do you see benefit paid anywhere? No, benefit paid only reduce the PBO.
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We are talking about pension accounting so we are really talking about outflow from the comapny due to pension. Benefit paid are coming out of the plan asset, the firm is not writting a check for that. The plan asset does not even seat at the firm. the firm has promised some future benefit and has to make enough “contribution” into the plan asset in order to meet this future benfit; the rest is just accounting not CASH…
Put me in that camp as well abnitchas. No calc needed for that particular question.
which says?
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Well the plan in question was technically unfunded, correct me if I’m wrong
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“For a sponsoring company, the cash flow impact of pension and other post-employment benefits is the amount of contributions that the company makes to fund the plan— or for unfunded plans, the amount of benefits paid.” (Institute 195)
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Hi cgottuso8190, so this means if PBO> FMV Assets, benefits paid = total cash out flow?
What is an unfunded plan?