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Hello sir, I’d come across a question from Kaplan exam kit (6th – Jocatt)
The doubt I’d in this is regarding W4 – defined benefit scheme
OB @ 1/12/X1 – 22
Service cost – 16
Net interest – 02
NET REMEASUREMENT COMPONENT GAIN for the year (per OCI given) – (8)
contributions paid (bal fig.) – (7)
CB @ 30/11/X2 – 25
remeasurement component as per question is gain of +8.
So my doubt is, why is the remeasurement component subtracted in calculating contributions paid out when the gain was reported in OCI
Best I can do is say what should be in CFS if prepared properly.
Two entries both in OPERATING ACTIVITIES:
1. Add back service cost charged to P&L – because it is a non-cash item
2. Deduct contribution paid because they are a cash item
The W4 you have typed out looks logical though it’s very hard to see it when they don’t show assets and liabilities separately
If it helps this is an extremely old question from the times when cash flow questions were disgusting – they are not now :). In reality the company will know contributions paid so you are less likely to have to calculate them