Pensions and the Statement of Cash Flows
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The company’s cash contribution toward funding the pension plan is the cash flow impact (this is different from current period pension expense)
The pension funding contribution is an operating cash outflow.
When the analyst calculates the company’s true “economic” pension expense, he/she will need to compare this against the cash funding contribution. In the event that the contribution exceeds the economic pension expense, the excess can be viewed as a debt repayment and the excess amount can be designated a financing cash outflow. Alternatively, if a company’s contribution is less than its economic pension expense, the shortfall can be viewed as a financing cash inflow.