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CFA - Equity > Fin - reporting > Flashcards

Fin - reporting Flashcards

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1
Q

Choice of method - Investment, Equity, Acquisition differences in NI and A,L etc

A

NI same for all.

Assets, Liabilities, equity, revenues and expenses are high under acquisition compared to equity

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2
Q

Investment - HtM, AVS, HFT differences

A

HtM - at cost on balance sheet; interest and realized gain/losses on IS
ASF - at Fair Market Value with unrealized gains/losses in equity on the balance sheet (other comprehensive income); dividends interest, realized gains on IS
HFT - at FMV; dividends, interest, realized and unrealized gains/losses on IS
Designated as fair value - like held for trading

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3
Q

IFRS -vs GAAP Unrealized FX gains on available for sale debt securities recognized where?

A

on available for sale debt securities recognized on income statement under IFRS and OCI under US GAAP

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4
Q

IFRS vs - GAAP good will

A

IFRS permits either the partial goodwill or full goodwill methods to value goodwill and non controlling interests. GAAP requires the full goodwill method.

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5
Q

Pension Accounting PBO components 4

A

current service cost, interest cost, actuarial gains/losses, benefits paid

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6
Q

Calculate funding status

A

Funding status = plan assets - PBO = Balance sheet asset (liability) under GAAP and IFRS

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7
Q 
Self contained sub , functional does not equal presentation - Current rate
Assets/Liabilities
Common Stock 
Income statement 
Exposure 
Dividends
A 
Assets/Liabilities at current rate 
Common Stock at Historical
Income statement at average rate
Exposure = Shareholders equity
Dividends at rate when paid
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8
Q 
Functional = presentation currency - temporal 
monetary assets/liabilities 
non monetary assets/liabilities
Sales SGA
COGS/Deprecation 
Exposure
A

monetary assets/liabilities at current rate
non monetary assets/liabilities at historic rate
Sales SGA - at average rate
COGS/Deprecation - at historic rate
Exposure = monetary assets - monetary liabilities

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9
Q

Beneish model

A

used to detect earnings manipulation based on eight variable

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10
Q

High Quality Earnings are what

A
  1. Sustainable: expected to recur in future

2. Adequate: cover company’s cost of capital

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11
Q

IFRS vs GAAP: reclassification of passive investments

A

IFRS - restricts reclassification into/out of FVPL

US GAAP no restrictions

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12
Q

IFRS vs GAAP: impairment losses on passive investments, allowed?

A

IFRS - reversal allowed if due to specific event

US GAAP no reversal of impairment losses

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13
Q

IFRS vs GAAP: fair value accounting, investment in associate, allowed?

A

IFRS - only for venture capital, mutual funds, etc

US GAAP Fair value accounting allowed for all

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14
Q

IFRS vs GAAP: Good will impairment process

A

IFRS 1 step (recoverable amount vs carrying value)

US GAAP 2 steps identify; measure amount)

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15
Q

IFRS vs GAAP: Acquistion method contingent asset recognition, recognized?

A

IFRS - Contingent assets are not recognized

US GAAP Recognized; recorded at fair value

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16
Q

IFRS vs GAAP: Prior service cost

A

IFRS - Recognized as an expense in P&L

US GAAP - Reported in OCI amortized to P&L

17
Q

IFRS vs GAAP: Actuarial gains/losses

A

IFRS re measurements in OCI and not amortized

US GAAP OCI, amortized with corridor approach

18
Q

IFRS vs GAAP: Dividend/Interest income and interest expense

A

IFRS Either operating or financing cash flows

US GAAP - must classify as operating cash flow

19
Q

Accruals Ratio Balance sheet

A

= (NOAend - NOAbeg)/[(NOAend + NOAbeg)/2]

Accruals ratio - The lower the ratio, the higher will be the earnings quality.

20
Q

Accruals Ratio Cash flow

A

= (NI - CFO - CFI)/[(NOAend + NOAbeg)/2]

Accruals ratio - The lower the ratio, the higher will be the earnings quality.

21
Q

Reclassification into/out of held-for-trading

differences for IFRS and USGAAP

A

Under the current standards, IFRS typically does not allow reclassification of investments into and out of fair value through profit or loss category and reclassification of investments out of held-for-trading category. U.S. GAAP does permit securities to be reclassified into or out of held-for-trading or designated at fair value.

22
Q

Persistence Factors - High/Low

A

A high persistence factor will be associated with low dividend payments, which is exactly the case with Schubert.
A low persistence factor will be associated with significant levels of nonrecurring items. However, Schubert has very few nonrecurring items (which would suggest a high persistence factor).

23
Q

Beginning PBO to Ending PBO inputs

A 
Beginning PBO
\+Current Service Cost
\+Past Service Cost
\+Interest Cost
- Actuarial Gain or + loss
-Benefits Paid
= Ending PBO
24
Q

Ending fair value of assets

A

Ending = beginning fair value + contributions + actual gains - benefits paid

25
Q

Total Periodic pension cost

A

= current service cost + past service cost + interest cost + actuarial loss - actuarial gain - actual return on plan assets.
= ending PBO - beginning PBO + benefits paid - actual return on plan assets
= contributions - (ending funding status - beginning funding status)
Total periodic pension cost = service cost + interest cost - actual return on plan assets + plan amendments

26
Q

Periodic Pension cost in P&L IFRS

A

Current + Past Service Cost - discount rate* (beginning plan assets - beginning PBO)

27
Q

Increasing discount rate will do what

A

Lower service cost and lower PBO

28
Q

How to calculate interest cost

A

Interest cost = discount rate * beginning funded status

29
Q

Effects of higher expected return?

A

Reduces pension expense and results in higher NI.

Neither the PBO or the funded status is affected by the expected return

30
Q

Plan Assets

A

+ Contribution
+ Actual Return
- Benefits Paide
= Fair Value oat the end of the period

31
Q

PBO

A 
\+Service Cost
\+Interest Cost
\+ Past service cost (plan amendments)
\+/- Acturial losses/gains during the year
- Benefits paid
=PBO at the end of the year
32
Q

Remeasurement gain

A

Net income = ending retained earnings − beginning retained earnings + dividends paid.

Remeasurement gain = net income − net income before remeasurement gain

33
Q

Functional vs Current

A

The basis for using the current rate method is when Functional Currency is NOT the same as Parent’s Presentation (reporting) Currency. The basis for using the temporal method is when Functional Currency = Parent’s Presentation Currency.

34
Q

Pure balance sheet or income ratios that are unaffected by current rate method

A

Current ratio
Quick Ratio
LTD - to total capital

Gross Profit Margin
Net Profit Margin
EBIT over interest Expense

35
Q

Periodic Pension Cost

vs TPPC

A

Service Cost + Interest Cost - EXPECTED Return

Service Cost + Interest Cost - ACTUAL Return

CFA - Equity (9 decks)

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