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Cash flow and defined benefit plans

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Cash flow and defined benefit plans

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Stephen Widberg.
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  • Author
    Posts
  • April 29, 2021 at 1:24 pm #619182
    safanahmed
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    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

    April 30, 2021 at 3:07 pm #619310
    Stephen Widberg
    Keymaster
    • Topics: 11
    • Replies: 2837
    • ☆☆☆☆☆

    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

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