Lecture/notes queries

@eliaslinus said:
Hi Sir,

I have encountered the below difficulties during my studies:

Chapter 14 (pension) OT notes Example 1 –
Why are benefits paid out deducted from both the asset and liability? Can you please explain a little bit in detail what exactly happens?
Are benefits paid out, benefits paid out when the employee actually retires?

Chapter 16 – Derecognition of Financial asset that was subsequently recognised under OCI. In the OT notes pg 64 it says that Gains or losses previously recognised through OCI are reclassified through profit or loss, however in the lecture you are saying that we still recognise them under OCI and then we do a reverse transfer from OCE to RE. Which is correct please?

Example 2 1st point – Why in the 2nd lecture you said that at the disposal the non cash loss will go under operating activities and not under investing activities in the SCFs if it is a loss on shares?

Example 3 (financial liabilities)- In the lecture you said that we borrowed 1.9m and need to pay back 2.1m + 2%for 4 years? I did understand the part of the 2% for 4 years, what I didn’t understand is that if we borrowed 2m and had 0.1m issue cost from where did the 2.1 came from?

Can you please assist?

Regards,
Marylise Sacco

Hi Marylise,

Thanks for the questions but in future can you keep one question to one thread as it just makes life easier answering each one separately.

Chapter 14 – The benefits paid out are when the pensioner retires. The company will liquidate the asset in order to pay the liability, so we therefore reduce both asset and liability.

Chapter 16 – The gains/losses are reclassified through profit or loss.

Gains/losses are non-cash items and would likely be included within investment income, so the adjustment is made in the reconciliation of PBT to profit from operations. The cash inflow is adjusted in the investing activities section.

Is the borrowing not 2 million and the issue costs are net off to give 1.9 million?

Thanks