Hello everyone,
I have been trying to figure out two conecepts recently but could not. Hope someone can help clarify for me. Thank you!!
1. For the Cash flow statement approach “accruals” formula, accruals(CF)= NI - CFO - CFI.
Basically, form what I know ao far, this formula is removing all the accruals NOT captured in CFO and CFI but may be reflected in NI. I am wondering what are some of the accruals not in CFO and CFI but in NI?
2. based on the adjustment from the kaplan book page 107 in Accounting, it states that
“adjusted operating profit = Operating profit + periodic pension cost in P&L - Service cost”
Basically, it leaves only the “interest cost” and “expected return on assets” from the subtraction for the adjustment. The “interest cost” is added later when adjusting the interest expense. However, the “expected return on assets” is never added added back in the example. And later we adjust the “Actual Return on asset” to get “the other income”.
My question is: why do we add back the “Actual return on assets” to adjust the “other income” while we never subtracted before? Why don’t we add back the “expected return on assets” while we subtracted at first like the “interest cost” deducted for the adjustment first and added back later for the “interest expense”?
Many thanks!
I have been trying to figure out two conecepts recently but could not. Hope someone can help clarify for me. Thank you!!
1. For the Cash flow statement approach “accruals” formula, accruals(CF)= NI - CFO - CFI.
Basically, form what I know ao far, this formula is removing all the accruals NOT captured in CFO and CFI but may be reflected in NI. I am wondering what are some of the accruals not in CFO and CFI but in NI?
2. based on the adjustment from the kaplan book page 107 in Accounting, it states that
“adjusted operating profit = Operating profit + periodic pension cost in P&L - Service cost”
Basically, it leaves only the “interest cost” and “expected return on assets” from the subtraction for the adjustment. The “interest cost” is added later when adjusting the interest expense. However, the “expected return on assets” is never added added back in the example. And later we adjust the “Actual Return on asset” to get “the other income”.
My question is: why do we add back the “Actual return on assets” to adjust the “other income” while we never subtracted before? Why don’t we add back the “expected return on assets” while we subtracted at first like the “interest cost” deducted for the adjustment first and added back later for the “interest expense”?
Many thanks!