Question

Prepaid pension benefits is not considered an operating asset. Pension and post retirement benefits is considered an operating liability. Please clarify why Prepaid pension benefits is not part of the operating assets, and why Pension and post retirement benefits is part of operating liabilities.

Answer 1

1. Prepaid pension benefits are not considered an operating asset:

          Operating assets are those assets acquired for use in the conduct of the ongoing operations of a business; this means assets that are needed to generate revenue.

Cash, Prepaid expenses, Accounts receivable, Inventory, Fixed assets these are examples of operating assets.

          Below discussed assets are not operating assets

• Long-term investment purposes.
• Assets no longer used for operations, and
• A non-cash asset that is held for investment purposes.

Prepaid pension is not a part of operating why because the operating assets useful to operating ongoing purposes.

So prepaid pension benefits are not treat an operating assets.

2. Post retirement benefits are considered an operating liability:

          Primary operations of a firm, comprise of accounts payable, accrued expenses, and income tax payable are operating liabilities

          Operating liabilities are Capital lease obligations, post retirement benefit obligations and other accrued expenses; here post retirement benefits payable under pension plan, So post retirement benefits are considered an operating liabilities.