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September 2018 1iv

C

Claire123

Member
Hi,

Can someone please explain the answer to question 1iv - impact on the sponsoring employer? Not sure I follow why the answer says there is no immediate impact on cash cost, but there is an impact on the accounting cost and then goes on to talk about the funding assumptions? The answer also states that the company might be required to contribute at a rate different to the 20%, but the question asks us to consider the impact of the employer contributing at 20%, so not sure I understand how this is answering the question?

Thanks in advance.
 
The question suggests a 20% standard contribution rate for Ionic Metalworks (calculated using the current funding assumptions as used in the Seller Inc's scheme).

However Ionic Metalworks will want to assess the impact of this:
  • on its corporate accounts - possibly different to 20% to reflect different accounting assumptions
  • on its contributions - as it may be required to pay a different amount because Buyer Corp's scheme may fund differently e.g. using different assumptions.
 
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