Exam 2 (7,8,9,10) Flashcards
Carrying amount
-Actif pas amorti dans balance sheet
-VA(t)
-book value=net asset
financial assets: control? percentage? accounting method?
-No significant control
-<20%
-Amortized cost/FVOCI/FVPL
associates: control?
percentage? accounting method?
-significant control
-[20%, 50%]
-Equity method
Combinations/acquisition: control? percentage? accounting method?
-control
-50%>
-Acquisition method
Equity method: investment on balance sheet?
Cost+%*(income-dividends)
Goodwill
Purchase > Net asset
purchase - %*Book value= excess
goodwill = excess - (fair value asset - book value asset)
Fair value: IFRS? US GAAP?
IFRS: venture
US GAAP: All
Joint venture: control?
percentage? accounting method?
-Shared
-Varies
-Equity mehtod
Goodwill
Purchase < Net asset
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
NCI
percentage not owned *Fair value ENTIRE
Defined contribution (DC) pension plan
The benefit depends on the contributions made by the employer and the investment performance of the plan assets.
Defined benefit (DB) pension plan
The benefit is determined by a formula that considers factors like years of service, salary history, and a predetermined benefit percentage.
Net pension liability or asset
Net pension L/A = Present valut of DB - Fair value of plan A
DB pension expense
-Current service cost
-Interest cost
-Actuarial gains/losses
-Expected return on plan assets
-Past service cost
Factors increaseing pension obligations
-Lower discount rates
-Higher salary increases
-Longer life expectancy (post-retirement)
-Longer periods of service
DB pension plan underfunded
pension obligation > fair value of the plan assets
=>Pension=liability
Discount rate
Yield of high-quality corporate bonds with a maturity similar to the timing of the pension obligations
Three common actuarial assumptions in pension calculations
-Discount rate
-Expected rate of return on plan assets
-Salary growth rate
What are the common forms of share-based compensation?
-Stock options
-Restricted stock
-Performance shares
Methods used to calculate the FV of stock options
-B&S
-Binomial
Vesting meaning in the context of employee benefits
Process by which employees gain ownership of employer-contributed benefits over time
Examples of post-employment benefits other than pensions
-Retiree healthcare benefits
-Life insurance
-Disability benefits
Functionnal currency
Currency of business activities (Souvent devise du pays)
Presentation currency
Currency of financial statements
Foreign currency transaction exposure, and when does it occur?
Quand le taux de change affecte la valeur des transactions
Current rate method
When used? Rates used?
Parent currency ≠ Subsidiary currency
-All Asset & Liabilities: current rate
-Equity: historical
-Revenue & expense: Average exchange rate
Temporal method
When used? Rates used?
Parent currency = Subsidiary currency
-Monetary Asset & Liabilities: current rate
-Non-Monetary: Historical
Where is a translation adjustment reported in financial statements?
If parents ≠ functionnal: OCI (income statement)
If parents = functionnal: NI (balance sheet)
How do the current and temporal methods affect financial ratios?
Current method: Balance or Income statement are preserved, but mix BS and IS distorded
Temporal method: Ratios using historical costs less distorded
How do currency fluctuations affect sales growth in multinational operations?
Subsidiary currency appreciate VS parents
=> Increase/boosting reported growth
What are the two main ways companies manage currency risks?
Natural hedging: Aligning currency of expenses with revenue
Financial hedging: Using financial instruments like forward contracts or options
