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Mgmt CIMA Core > F2 > Flashcards

F2 Flashcards

1
Q

Characteristics of ordinary and preference shares and different types of long-term debt.

A

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2
Q

Operation of the stock and bond markets.

A

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3
Q

Share and bond issues.

A

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4
Q

Role of advisors.

A

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5
Q

Cost of equity using the dividend valuation model, with and without growth in dividends.

A

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6
Q

Post-tax cost of bank borrowings.

A

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7
Q

Yield to maturity of bonds and post-tax cost of bonds.

A

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8
Q

Post-tax cost of convertible bonds up to and including conversion.

A

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9
Q

WACC and its use.

A

WACC = (cost of liabilities)+(dividends and retained earnings) / (balance sheet at market value)

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10
Q

Production of:
- consolidated statement of comprehensive income
- consolidated statement of financial position
- consolidated statement of changes in equity
- consolidated statement of cash flows
including the adoption of both full consolidation and the principles of equity accounting, in accordance with the provisions of IAS 1, IAS 27, IAS 28, IFRS 3, IFRS 10 and IFRS 11.

A

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11
Q

The need for and nature of disclosure of interests in other entities, in accordance with IFRS 12.

A

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12
Q

The need for and nature of disclosures of contingent assets and liabilities, in accordance with IAS 37.

Recognition and measurement of:

  • revenue, in accordance with IAS 18 and the provisions of the framework
  • operating and finance leases, in accordance with IAS 17
  • financial instruments, in accordance with IAS 32 and IAS 39 (excluding hedge accounting) - provisions, in accordance with IAS 37
  • share-based payments, in accordance with IFRS 2
  • provision for deferred taxation, in accordance with IAS 12.
A

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13
Q

Ethics in financial reporting.

A

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14
Q

Additional acquisition in the period resulting in a simple investment becoming a controlling interest, in accordance with the provisions of IFRS 3.

A

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15
Q

Calculation of the gain/loss on the disposal of a controlling interest in a subsidiary in the year, in accordance with the provisions of IFRS 3.

A

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16
Q

Adjustment to parent’s equity resulting from acquiring or disposing of shares in a subsidiary, in accordance with the provisions of IFRS 3.

A

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17
Q

Provisions of IAS 21 in respect of consolidating a foreign subsidiary and the calculation of the foreign exchange gains and losses in the period.

A

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18
Q

Impact of indirect effective holdings on the preparation of group financial statements.

A

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19
Q

The need for and nature of disclosure of related party transactions, in accordance with IAS 2.

A

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20
Q

Calculate basic and diluted earnings per share, in accordance with IAS 33.

A

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21
Q

Ratios for profitability, performance, efficiency, activity, liquidity and gearing.

A

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22
Q

Interpretation of the primary financial statements and any additional information provided.

A

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23
Q

Action that could be realistically taken by the entity’s management to improve financial performance and strengthen financial position, taking into account ethical considerations and internal and external constraints.

A

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24
Q

Inter-segment comparisons.

A

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25
Q

International comparisons.

A

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26
Q

Related Parties disclosure requirements (IAS 24)

A 
nature of relationship
nature of transaction
amount of transaction
outstanding balances of transaction
any provisions for doubtful debts
27
Q

Consolidate Financial Statements

A

Non-controlling interest (NCI): less than 50%
=> Fair value method (market value) at acquisition
=> Proportion of net assets at acquisition

28
Q

Associate Companies

A

Requires significant influence: 20-50+% of shares

  • BoD appointment
  • influence on policy making
  • material transactions between parties
  • interchange of managerial personnel
  • provision of essential tech
29
Q

Consolidated statement of comprehensive income

A

CSCI:
share of profit from associate
- impairment loss
- PUP (aka PII, meaning Provision for unrealized profit)

30
Q

Covenants associate with taking on debt (financing)

A

A type of contract in which the covenantor makes a promise to a covenantee to do (affirmative covenant) or not do some action (negative covenant).

ie:

  • dividend restrictions
  • financial ratios
  • financial reports
  • issuing further debt
31
Q

Long term financing:

A

Securities:
Fixed Charge: (Darlehen) against asset
Floating Charge: against general assets

Covenants: limitations associated with new debt

Bank finance:
Money market
Revolving credit facilities

Capital markets:
Bonds
Commercial papers (unsecured short-term loan notes)

Sale and lease back

(Gov’ment) Grants or Assistance

Debt with attached warrants (Wandeloption)

Convertible debt (Wandel)

Venture capital or Business angels

32
Q

Impairment

A

triggering event
if there is evidence
impairment loss: difference between carrying value and PV of CF from asset (which goes into the P&L)

33
Q

Derecognise assets if:

A

rights to cash flow expires
risk and reward of asset was transferred

Factoring: substantially all risks and rewards are transferred

34
Q

Derivate definition

A

value from an underlying asset, price, rate or index.

Characterized by:
value change in response to underlying
little or no initial investment
settle in the future

Types:
Forward: obligation to buy or sell in the future on agreed terms (specific asset, price, date)
Forward RATE agreements: fixed rate for floating
Futures: obligation to buy or sell std qty in future
Swaps: Exchange payments of specific intervals over a specific period
Options: right to buy or sell over a specific period

35
Q

Share based payments

A

Equity settled: at vesting

Cash settled: fair value of the liability

36
Q

EPS

A

earnings: net profit attributable to equity (after interest and tax)
number of shares: time weighted average

Diluted: fully diluted shares outstanding (i.e. including the impact of stock option grants and convertible bonds)

37
Q

Operating Lease vs

Financial Lease

A

Operating: no transfer of risk and ownership

Financial: risk and benefit of ownership is transferred to the lessee: goes into assets and liabilities (liabilities are discounted future ones)

Interest considerations:
Actuarial
Sum of digit basis

38
Q

Revenue reco - Services

A

revenue can be measured reliably
probable
stage of completion can be measured
cost to the seller can be measured

39
Q

Interest, royalties, dividends

A

probable

measurable

40
Q

Consignment inventory

Sale and repurchase

A

who owns risk and reward of ownership?

Is there an obligation to buy the product back?

41
Q

Provisions

A

Measurable
Probable
Past obligation

42
Q

Contingent liability or asset

A

not recognised in financial results
disclosed in a note

IF not probable OR amount cannot be measured

43
Q

Disposal of shares

A

Control to non-control

Control to control

44
Q

Step acquisitions

A

Non-control to control: shift from investment to associate

45
Q

FX translate or not to translate for FX receivables

A

Monetary items: translate

Non-monetary items: do not translate (leave historic rate)

46
Q

Deferred tax

A

Future tax liability for temporary difference between accounting and taxable profit

47
Q

Construction Contracts

A

% of completion (cost or certification basis)

accountancy (profitable or loss making)

48
Q

Related parties:
ARE
and
ARE NOT

A

Key mgmt personnel
Family
Same group

...not just...
sharing personnel
engage in a JV
conduct finance
are customers or suppliers
49
Q

Related parties disclosure requirements:

A
  • nature of relation
  • nature of transaction
  • traded amounts
  • outstanding balance
  • any provisions on the balances
50
Q

Subsidiary (50%+):

Associate (+/-20%-50%):

A

Acqui.Acc.: net assets, Goodwill, NCI

Equity Acc.: (no conso); only “investment in associates”

51
Q

NCI methods

A

fair value: use market price for NCI value

proportion net assets: fair value of entity times NCI share %

52
Q

Impairment of Goodwill

A

tested each reporting date

fair value
proportion of net assets

53
Q

PUP

A

Provision for unrealised profit (aka PII)

has do be consolidated out in group accounts, same as intra company trade

54
Q

Associate definition

A

significant influence: 20%+ dependent on the level of control

55
Q

Joint Venture

A

equity accounting (as associate - no conso)

56
Q

Complex groups

A

Vertical group
Mixed group

Might require indirect holding adjustment (IHA)

57
Q

ETHICAL

A

Integrity, Objectivity, Professional Competence and Due Care, Confidentiality and Professional Behaviour.

58
Q

FX Which rate for subsidiaries?

A

Income: average rate of the year

Goodwill of subsidiary: closing rate

Mgmt CIMA Core (2 decks)

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