FR&A

Question 1

Beneish Model

Answer 1

8 variable regression model to estimate probability of earnings manipulation

Question 2

Adjustment for Operating Leases

Answer 2

PV of minimum lease payments @ implicit interest rate on capital leases

Question 3

FIFO Inventory =

Answer 3

LIFO Inventory + LIFO reserve

Question 4

Adjustment for DTL

Answer 4

Treat as equity if not expected go reverse in the future

Question 5

Adjustment for Capitalized Interest

Answer 5

Subtract amount from asset and decrease equity

Increase interest expense in IS by same amount

Question 6

Securitized receivables

Answer 6

Increase receivables and current liability by proceeds amount from sale

Adj CF: decrease CFO and increase CFF

Question 7

The Temporal Method is used to…

Answer 7

Remeasure financials from a Local currency to the Functional currency

Question 8

The Current Method is used to…

Answer 8

Translate financials from the Functional currency to the Reporting currency

Question 9

Temporal Method B/S FX Translations

Answer 9

Monetary Assets/Liabilities: Current Rate
Non Monetary Assets/Liabilities: Historical Rate
Common Stock: Historical Rate
R/E: Plug
Total Equity: Mixed Rate

Question 10

Current Rate B/S FX Translations

Answer 10

Monetary Assets/Liabilities: Current Rate
Non Monetary Assets/Liabilities: Current Rate
Common Stock: Historical Rate
FX G/L: Plug
Equity (in total): Current Rate

Question 11

Plan Assets =

Answer 11

Beginning Plan Assets
+ Contributions
+ Actual Return
- Benefits Paid

Question 12

PBO =

Answer 12

Beginning PBO
\+ Service Cost
\+ Interest Cost
\+/- Past Service (plan amendments)
\+/- Actuarial losses/gains during the year
- Benefits Paid

Question 13

TPPC =

Answer 13

Change in PBO + benefits paid - actual return on plan assets

or

Contributions - (Change in Funded Status)

Question 14

Pensions GAAP vs. IFRS

Answer 14

Past Service Cost: OCI, amortized over service life vs. IS

Actual Gain/Loss: Amortized in IS, Unamortized in OCI vs. All in OCI (unamortized)

Question 15

Firm Exposure under Current Rate Method

Answer 15

Shareholder’s Equity

Question 16

Firm Exposure under Temporal Method

Answer 16

Net Monetary Assets

Question 17

Inventory Valuation (GAAP vs. IFRS)

Answer 17

GAAP: Min[Cost,MV] //
MV Upper Limit = NRV
MV Lower Limit = (NRV-Margin) // Not reversable

IFRS: Min[Cost,NRV] //
NRV = Est Sell Price - Cost of completion - Selling Cost //
Reversals allowed

Question 18

Long Lived Asset Valuation (GAAP vs. IFRS)

Answer 18

GAAP: Impaired when BV > Undiscounted CFs; Write down to Fair Value or Discounted Future CFs //Loss on IS irreversable

IFRS: Impaired when BV > Recoverable Amount; Write down to recoverable amount // Loss on IS is reversable

Question 19

Avg Age of Asset

Answer 19

Accum Depreciation / Annual Depreciation Expense

Question 20

Avg Depreciable Life of Asset

Answer 20

Gross Investment / Annual Depreciation Expense

Question 21

Remaining Useful Life of Asset

Answer 21

Net Investemnt / Annual Deprecation Expense

Question 22

COGS(FIFO) =

Answer 22

COGS(LIFO) - Δ LIFO Reserve

Question 23

Inventory (FIFO) =

Answer 23

Inventory (LIFO) + LIFO Reserve

Question 24

Cash (FIFO) =

Answer 24

Cash (LIFO) - (LR * Tax Rate)

Question 25

Equity (FIFO) =

Answer 25

Equity (LIFO) + [LR * (1-t)]

Question 26

Taxes (FIFO) =

Answer 26

Taxes (LIFO) + (Δ LR * Tax rate)

Question 27

NI (FIFO) =

Answer 27

NI (LIFO) + [Δ LR * (1-t)]

Question 28

A _____ in dividend yield _______ the estimated fair value of a call option when using the Black–Scholes model and hence would ______ the related compensation expense

Answer 28

decrease; increase; increase

Question 29

Stock option compensation expense:

Answer 29

Expense = Options granted × Option price on grant date / N-year service period

Question 30

PPC =

Answer 30

+ Service Costs
+ Interest Costs
- Expected Return on Assets
+ Amortization of Past Service Costs