Reformulating Financial Statements for Pension Contributions

American Airlines reports the following pension and retiree health care (Other) footnote as part of its 10-K report.

($ millions)	2016	2017	2018
Total Assets	$51,274	$51,396	$60,580

($ millions)	2016	2017	2018
Fair value of plan assets at beginning of period	$9,707	$10,017	$11,395
Actual return on plan assets	915	1,797	(1,151)
Employer contributions	32	286	475
Settlements	(2)	(4)	(4)
Benefit payments	(635)	(726)	(662)
Other	-	25	-
Fair value of plan assets at end of period	$10,017	$11,395	$10,053

Use the above information, along with the two prior years information below, to answer the requirements.

$ millions	2016	2017	2018
Cash contributions to pension plan	$32	$286	$475

a. Use the three-year average of the employer contribution to pension benefits (in dollar terms) to reformulate the statement of cash flows for each of the three years 2016, 2017, and 2018. See Analyst Adjustments 10.2 for guidance in the reformulation process.

Compute the 3 year average employer contribution to pension benefits.

Round to the nearest whole number.

$Answer

($ millions)

Use rounded figure for subsequent computations.

Use negative signs with answers to indicate adjustments that reduce account balances.

Statement of Cash Flow Adjustments	2016	2017	2018
Cash contribution	Answer	Answer	Answer
Cash from operations	Answer	Answer	Answer

b. Reformulate the balance sheet for each of the three years 2016, 2017, and 2018.

• Assume a tax rate of 22%.

• Round answers to the nearest whole number.

• Use negative signs with answers to indicate adjustments that reduce account balances.

Balance Sheet Adjustments	2016	2017	2018
Cash balance	Answer	Answer	Answer
Deferred tax liabilities	Answer	Answer	Answer
Pension plan assets	Answer	Answer	Answer