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Hi,
” After conculting with the actuaries, the company decide to reduce its contributions for the year to $45 million.”
Why this statement would result to an increase of current liability by $45 million ? I thought contribution received only causes an increases in plan assets.
Hi, where have you taken the note from? I don’t recognise it as an extract from anything that I have written! On the face of it I would agree with you but it is possible (and I emphasise “possible”) that you have misinterpreted the answer
We are preparing the financial statements for the group and not for the pension fund. However, that aside, working 8 in the printed solution is rather confusing!
The (45) that you see in brackets and identified as “contributions accrued” is in fact added to the figure brought forward, identified as “surplus as at ????” so our 45 is increasing this surplus brought forward ie it’s INCREASING the pension fund asset
So, it’s increasing the asset even though it’s shown in brackets and even though it’s identified as an accrual (contributions ACCRUED)
But, as I said two paragraphs earlier, working 8 is rather confusing!
I just hope that your mind is now clear
OK?
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