Pension Funding (Was BMET vs SYK vx ZMH)

[Mark Eckman]

Title: Message

Ivan,   While the cash flow statement provides a view in general of where the cash came from, it does not get down to many specifics.  Let me walk you through he accounting for pensions.   When the actuaries determine the pension expense amount for the year, the entry the company will make increases expense and increases the pension liability.  When the company makes a contribution payment, that will reduce cash and reduce the pension liability.  That's the simple part.  However, when a plan is under funded (that is, liabilities of the plan exceed the plan assets) an additional entry is made called the minimum pension liability.  The minimum pension liability attempts to record the under funding of the pension by recording the under funding amount on the balance sheet as a liability and then offset is in equity.  I'm not going into much detail here unless there is a screaming demand for these details.   Pension accounting has some rather counter intuitive elements as it tries to merge the concepts of historical cost as the basis for accounting, mark-to-market of the value of the pension liability and actuarial science.    The FASB has started a project on changes to pension accounting that will effect all companies and will take a two phased approach.  In the short term, they want to put the pension on the balance sheets without any of the actuarial changes.  Longer term they are still debating.  Here's a link if you have trouble sleeping at night.  <g>   http://www.fasb.org/project/postretirement_benefits.shtml   I have not yet digested this as my focus for the last few months has been on Congressional efforts at pension reform.  Unfortunately, Congress has not seen fit to educate themselves, but rather dive in and create more issues.  As a result, there will be no new pension legislation from this session.   Mark Eckman -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Ivan Hodiny Sent: Thursday, December 08, 2005 8:59 PM To: BetterInvesting's Investing Discussion List Subject: RE: BMET vs SYK vx ZMH Mark,   >> Remember, that is FUNDING so this is a cash flow issue, not an expense issue.  Pension funding requirements do not directly effect net income.<<   Isn’t this pension funding being taken out of “Retained Profits”? If not, where is this fund going to come from?   Ivan   ---- You can read and write messages or change your subscription options at the i-club-list web site at http://lists.better-investing.org. Log in using your e-mail address. You are currently subscribed to i-club-list as: [EMAIL PROTECTED] To unsubscribe simply send an e-mail to this address: mailto:%%email.unsub%% ---- You can read and write messages or change your subscription options at the unknown lmsubst tag argument: '' web site at http://lists.better-investing.org. Log in using your e-mail address. You are currently subscribed to unknown lmsubst tag argument: '' as: unknown lmsubst tag argument: '' To unsubscribe simply send an e-mail to this address: mailto:unknown lmsubst tag argument: ''