Exam 2 (7,8,9,10)

Question 1

Carrying amount

Answer 1

-Actif pas amorti dans balance sheet
-VA(t)
-book value=net asset

Question 2

financial assets: control? percentage? accounting method?

Answer 2

-No significant control
-<20%
-Amortized cost/FVOCI/FVPL

Question 3

associates: control?
percentage? accounting method?

Answer 3

-significant control
-[20%, 50%]
-Equity method

Question 4

Combinations/acquisition: control? percentage? accounting method?

Answer 4

-control
-50%>
-Acquisition method

Question 5

Equity method: investment on balance sheet?

Answer 5

Cost+%*(income-dividends)

Question 6

Goodwill
Purchase > Net asset

Answer 6

purchase - %*Book value= excess

goodwill = excess - (fair value asset - book value asset)

Question 7

Fair value: IFRS? US GAAP?

Answer 7

IFRS: venture
US GAAP: All

Question 8

Joint venture: control?
percentage? accounting method?

Answer 8

-Shared
-Varies
-Equity mehtod

Question 9

Goodwill
Purchase < Net asset

Answer 9

FULL GOODWILL
Net asset (Fair value ENTIRE)=Asset(FV)-liabilities(FV)

Goodwill=Purchase-Net asset (FAIR VALUE)

PARTIAL GOODWILL
*pareil mais on met le % owned partout

Question 10

NCI

Answer 10

percentage not owned *Fair value ENTIRE

Question 11

Defined contribution (DC) pension plan

Answer 11

The benefit depends on the contributions made by the employer and the investment performance of the plan assets.

Question 12

Defined benefit (DB) pension plan

Answer 12

The benefit is determined by a formula that considers factors like years of service, salary history, and a predetermined benefit percentage.

Question 13

Net pension liability or asset

Answer 13

Net pension L/A = Present valut of DB - Fair value of plan A

Question 14

DB pension expense

Answer 14

-Current service cost
-Interest cost
-Actuarial gains/losses
-Expected return on plan assets
-Past service cost

Question 15

Factors increaseing pension obligations

Answer 15

-Lower discount rates
-Higher salary increases
-Longer life expectancy (post-retirement)
-Longer periods of service

Question 16

DB pension plan underfunded

Answer 16

pension obligation > fair value of the plan assets
=>Pension=liability

Question 17

Discount rate

Answer 17

Yield of high-quality corporate bonds with a maturity similar to the timing of the pension obligations

Question 18

Three common actuarial assumptions in pension calculations

Answer 18

-Discount rate
-Expected rate of return on plan assets
-Salary growth rate

Question 19

What are the common forms of share-based compensation?

Answer 19

-Stock options
-Restricted stock
-Performance shares

Question 20

Methods used to calculate the FV of stock options

Answer 20

-B&S
-Binomial

Question 21

Vesting meaning in the context of employee benefits

Answer 21

Process by which employees gain ownership of employer-contributed benefits over time

Question 22

Examples of post-employment benefits other than pensions

Answer 22

-Retiree healthcare benefits
-Life insurance
-Disability benefits

Question 23

Functionnal currency

Answer 23

Currency of business activities (Souvent devise du pays)

Question 24

Presentation currency

Answer 24

Currency of financial statements

Question 25

Foreign currency transaction exposure, and when does it occur?

Answer 25

Quand le taux de change affecte la valeur des transactions

Question 26

Current rate method
When used? Rates used?

Answer 26

Parent currency ≠ Subsidiary currency

-All Asset & Liabilities: current rate
-Equity: historical
-Revenue & expense: Average exchange rate

Question 27

Temporal method
When used? Rates used?

Answer 27

Parent currency = Subsidiary currency

-Monetary Asset & Liabilities: current rate
-Non-Monetary: Historical

Question 28

Where is a translation adjustment reported in financial statements?

Answer 28

If parents ≠ functionnal: OCI (income statement)

If parents = functionnal: NI (balance sheet)

Question 29

How do the current and temporal methods affect financial ratios?

Answer 29

Current method: Balance or Income statement are preserved, but mix BS and IS distorded

Temporal method: Ratios using historical costs less distorded

Question 30

How do currency fluctuations affect sales growth in multinational operations?

Answer 30

Subsidiary currency appreciate VS parents
=> Increase/boosting reported growth

Question 31

What are the two main ways companies manage currency risks?

Answer 31

Natural hedging: Aligning currency of expenses with revenue

Financial hedging: Using financial instruments like forward contracts or options