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Interest on defined benefit plan

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Interest on defined benefit plan

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by P2-D2.
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  • Author
    Posts
  • August 20, 2019 at 12:22 pm #528208
    choopea
    Participant
    • Topics: 5
    • Replies: 4
    • ☆

    A company operates a defined benefit scheme. In statement of cash flows (operating activities), the calculation for interest paid is as below:

    Interest paid
    (Finance costs as shown in SPL – interest on defined benefit plan)

    My question is why the interest on defined benefit plan not included in the calculation of interest paid? Is it because it is a non-cash item?

    Thank you in advance.

    August 27, 2019 at 8:48 pm #539831
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7141
    • ☆☆☆☆☆

    Hi,

    Yes, the interest is accrued on the pension and it isn’t actually paid. It therefore needs to be deducted from the finance cost to get the interest paid figure.

    Thanks

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