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Hi tutor,
I’m trying to understand why the benefits paid out of the scheme (6 mil $) are not decreasing the net pension liability for the year. Mathematically speaking I understand, benefits paid out are cancelling themselves since they are part of both assets and liab computation… and when calculating the net liability it’s a – with a +.
Nevertheless, when I’m trying to find the logic, I would have said that the benefits paid out are a release for the net pension liability, but defenitely I’m getting wrong with my logic. Do you think you could help me find the rationale in this regard?Many thanks.
AndreeaBenefits will reduce the GROSS pension asset
Benefits will reduce the GROSS pension liabilityNET pension liability is the NET of the above (both have gone down by the same amount)
So, when you reconcile the NET liability – no need to take account of the benefits
Is that OK?
🙂
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