How Does CAM Increase Pension?

Although the defined-contribution gives more flexibility to the manager to manipulate the expense and liability, it requires lots of long-term complex assumptions and it raises concern that the annual pension expense is not the same as the annual pension funding contribution. For instance, CAM has doubled the pension plan within a year. This raised doubts from the employees on whether or not CAM has an ability to meet the commitment, as well as, it negatively affected the solvency of the entity that will raise concern from the creditors.
Based on the analysis, CAM is recommended to alter to defined-benefit plan, instead of using the defined contribution plan, which will significantly reduce the concern of disparity between the annual pension expense and the annual pension funding contribution. Along with the change, the financial statement of this year and the previous year should be adjusted, which is most likely to decrease huge amount of unsure expense caused by increased estimated life-span of the employees, therefore, result higher net income and higher return on asset ratio. The side effect of altering the pension method is the potential increase in the liability, since any unmet contribution by cash will be reported …show more content…
Under IFRS, it is suggested for an investor to own 20 to 50 percent of votes of an investee company for the investment to be considered strategic. However, the ultimate judgement will be based on whether or not the investing company has significant influence on the investee company in a particular situation. Since CAM takes up 40% of the seats on CML’s Board of Directors, it indicates that CAM has substantial influence while making decisions on investee’s management related issues. Having clarified that CAM’s investment on CML is strategic, the equity method of accounting should be used (Appendix F). The method will positively affect the CAM’s financial